If your house is at risk, please make sure that you seek advice. Dealing with your home in bankruptcy is highly complex and cannot be written into a website. The following merely answers some questions.
Will I lose my home?
No. It is a myth that you will permanently lose your home. However, you should be aware that your home will be dealt with, the outcome of which will depend on several factors. The trustee applying to the court for the sale and possession of your property may be the outcome. It may also be possible for you to buy back the property.
Is there a wrong way to deal with the home?
Yes, yes and yes! Suppose the trustee in bankruptcy has reason to suspect that you have dealt with your home adversely before the bankruptcy. In that case, they may exercise their investigative powers to establish the nature of the transaction and your intentions at the time.
If the nature of the transaction and your intentions constitute a bankruptcy offence, you may be punished by imprisonment, a fine or both.
Realising that some previous transactions may be reversed or altered is essential.
Can you deal with the home before bankruptcy?
There is nothing wrong with re-establishing your legal position about the home, but make sure you seek legal help first. For example, this may happen when a non-bankrupt party has an interest in protecting.
You must seek legal advice to deal with your property before bankruptcy. Seek advice from a solicitor.
What can happen to your home in bankruptcy?
The following may happen as your home is dealt with during bankruptcy:
- Your interest may re-vest back to you
- A friend or relative can purchase your share of the equity
- Your house may be sold on the open market without the need to go to court if your non-bankrupt co-owner agrees and the trustee agrees.
- You may be able to arrange with the trustee to buy back your interest over some time.
- The trustee may apply to the court for an order for sale and possession
- The trustee may apply to the court for a charging order
- The trustee may apply to the court for a suspended possession order
You may be able to put off the sale for 12 months if you have children or a spouse living with you.
What is the 3-year rule?
The trustee has three years to deal with your interest in your marital home, after which the interest will return to you. These three years will run from the date of the bankruptcy order or when the Official Receiver or trustee was notified of the property if notification occurs more than three months after the bankruptcy order. In exceptional circumstances, these three years can be extended.
Do I have any defence to dealings with my home?
There may be situations where you disagree with the trustee’s claim on your home and may wish to defend a claim. For example, a joint property where the non-bankrupt owner is entitled to more than 50% and the trustee believes the entitlement is just 50%.
As mentioned at the top of this page, seek advice if you are considering bankruptcy. Dealing with property in bankruptcy is a complex matter.
The Insolvency Service has issued a guide on this topic.