Haunted by houses they no longer have

Bill Hope has been hit with a bill for £27,000 from Abbey National offshoot HMC. Paul French has had a £380,000 mortgage shortfall demand from the Nationwide, possibly the highest shortfall debt on record.

Neither has the remotest hope of paying and both would lose their livelihoods if pursued to court. Both made a settlement offer that was rejected, neither has had a full breakdown of costs and both dispute their debts.

Bill Hope, 55, bought a £90,000 home in Rochester with a £70,000 loan from Imperial Bank of Canada in May 1989. Interest rates soared and he was soon overwhelmed by £1,000 plus a month payments. His offer of £500 a month was rejected. He handed in his keys in November 1989 and was told that was the end of the matter. His loan was later sold to HMC, now owned by Abbey National.

He says: "There was a £79,000 offer for the house but they got only £71,000 for it. That was enough to clear the debt but they added in costs, arrears, interest and interest on interest so they now claim £27,000. I've offered £1,000 but their compromise is £21,000. I work in finance, so I can't afford an adverse judgement. If I'd have known the debt would come back nearly 10 years later, I would have fought harder to keep my home."

Paul French, 45, is the managing director of a thriving stationery manufacturer in Edinburgh. In May, he was sent a demand by solicitors Eversheds working for the Nationwide for nearly £240,000; his staff saw as it was sent on his office fax. Last week, Eversheds sent a revised bill for £380,158.

He had handed in his keys to the Nationwide for two properties nearly 10 years ago. There was also a bridging loan. He claims both properties were sold at well below market value. The Nationwide has always known his business address.

He says: "Besides disputing the sum, I can't pay. I live in rented accommodation and my only asset is my share in the business. Eversheds have told me that they watch company accounts so they discovered we had a good year. But I can't touch a penny of it or take a loan - the venture capitalists who back me would never allow it. I have offered £30,000 over two years but they rejected it."

Handling a shortfall bill

If you're hit with a demand for a mortgage shortfall debt, don't panic. Debt expert Chilli Reid of the Oxfordshire Money Advice Project suggests these dos and don'ts.

DON'T acknowledge the debt or even a demand for it in writing-if you do, the 12 year period starts afresh. Discussions should be by phone.

DO visit a Citizens Advice Bureau for specialist debt help.

DON'T enter a contract which involves a fee charging debt counselling service.

DO ask for a complete breakdown of the shortfall calculation including interest.

DON'T agree to a lender's "full and final settlement" - negotiation could cut it.

DO work out what you can afford - your adviser will need to know your "bottom line".

DON'T give the lender or their debt chasers facts about your financial situation.

DO discuss it with your family, but don't try to meet demands with loans from them.

DO write down salient facts such as an employee of the lender telling you that the matter would be closed once the keys are handed in.

NEVER threaten bankruptcy - that's a last ditch weapon to be wielded only by professional debt advisers.