Q MY PARENTS bought their five-room HDB flat in 1996 when property prices were at a peak.
Last year, when my dad died, there was still an outstanding HDB loan of $300,000.
But the flat was not insured as a policy taken out under the Home Protection Scheme had expired around July last year.
It was not renewed as they could not afford the premium. My father was retrenched and unemployed at that time. He was 62.
My mum, who is unemployed, now bears the burden of the loan as she is the co-owner of the house. She has no option but to sell off the flat.
With the current market value of HDB flats, it is impossible to repay the loan and there will be a shortfall.
What if she is unable to cover the shortfall?
Will she face bankruptcy? If she is a bankrupt, will she be able to co-own a flat with my 25-year-old brother in future?
As children, will we be liable for the outstanding debt?
I own a flat, as does my sibling, so we are unable to help with the shortfall.
A Despite the recent property boom, property prices don't seem to have found their way back to pre-1996 levels and many people do find themselves in a predicament similar to yours.
If there is a shortfall, the HDB would be entitled to recover this from your mum.
If the shortfall is above $10,000, the HDB would be entitled to file a bankruptcy petition against her.
However, you would be well advised to contact the officer in charge of your mum's case to see how best to settle the outstanding payment. Generally in genuine cases, HDB would usually allow the borrower to repay the outstanding sum by instalments.
A bankrupt would be allowed to own a five-room or smaller HDB flat under certain conditions.
If your mother is made a bankrupt and your brother wishes to buy a flat with her, I would suggest that you then obtain the necessary clearance from the HDB and the Official Assignee before your brother signs the sale and purchase agreement.
Finally, you and your siblings would not be liable to pay the shortfall as you are not the borrowers or the guarantors of the loan.
Vijai Parwani
Lawyer
Parwani & Co
