The Court of Appeal clarified the meaning of “debt” in a mortgage case involving lenders Interbay and Seculink.
The 2020 regulation provides a suspension of debt on the mental health side, according to law firm Brightstone Law, and the solution to the case “will have a significant impact on the bridge lenders.”
The case involved David Forbes, who received a 10-year loan of £1.3 million through Interbay in 2016, an appeals court document said.
However, Forbes defaulted on the debt in 2018, and in 2019, Interbay demanded repayment of capital, plus £60,464,10 of £1.6 million.
Forbes also borrowed £260,000 from Seculink to a bridge loan he received in 2018, violating five properties he owned. The interest for four months is 2.5% per month, and if defaulted, the interest for default is 12% per month.
The loan is believed to be a default by 2021, and Sculink also requests payment.
In April 2022, Forbes applied for a mental health crisis suspension under the care of Tandridge Community Health Recovery Service.
Brightstone said the debt suspension program “provides temporary protection for debt individuals to prevent law enforcement, interest, expenses and expenses, but certain conditions are met.
“The program includes a 60-day standard suspension and a longer mental health crisis suspension, which continues during treatment.”
The case is the first time the Court of Appeals considers how the protection of secured debts is applied, especially the capital amounts of the mortgage that have been fully requested.
Lord Zacaroli issued a judgment on June 6, saying: “The question is whether the main amount of the secured debt has expired before the start of the suspension of debt, which is an unqualified debt within the meaning of regulation, and therefore is excluded from the definition of “debt” and is therefore excluded.
The court ruled that whether the sum of principal of a secured debt was called before the suspension was a qualified debt and therefore neither a qualified debt nor a suspended debt.
Additionally, Honorary Judge Evans-Gordon, who presided over her, said: “The plan is not a package release of all future debts…it balances between maintaining debt levels or freezing debt levels on the date of the suspension of filings, while also suspending its execution while ensuring creditors are related to post-misunderstanding debts.
“This is not an obligation to continue to provide free credit. The debtor does not intend to make a living at the cost of the creditor.”
Jonathan Newman, senior partner at Brightstone Law, added: “The ruling provides creditors with gratifying certainty, strengthening the suspension of the plan is not to limit the execution of the mortgage, rather than the loss of installments.
“It confirms that the summoning capital does not qualify for debt suspensions, but rather addresses the view that creates considerable uncertainty in practice.”
