What will happen to my home in bankruptcy?

What will happen to my home if I'm made bankrupt?

This section covers the questions you are most likely to want answered about your home if you are made bankrupt:

Will I lose my home?

The Official Receiver or the trustee (if an insolvency practitioner has been appointed in place of the Official Receiver) may have to sell your home to go towards paying your bankruptcy debts.

This applies whether the home is freehold or leasehold and whether it is solely or jointly owned.

Please note that if your home is mortgaged and you do not keep up your payments, your lender may be able to sell your home.

You should consider contacting your lender about your bankruptcy and your mortgage payments.

Get advice:

If you haven't already received advice from us and are facing the possibility of bankruptcy, you can use our online bankruptcy test tool, which will provide you with a free assessment of whether you qualify for bankruptcy and what impact it will have on your current situation, and any alternative solutions available to protect your home. We'll also send you our "Free Guide to Bankruptcy" by email.

Or, if you’d prefer to speak to us, call our FREE Helpline on 0800 36 88 133 (freephone, including all mobiles).

When will the Official Receiver or trustee sell my home?

If your husband, wife or children are living with you, it may be possible for the sale to be put off until the end of the first year of your bankruptcy.

This gives them time to make other housing arrangements.

They should contact the Official Receiver or trustee dealing with your bankruptcy.

Can anything be done to stop the Official Receiver or trustee selling my home?

Your husband, wife, partner, a relative or friend may be able to buy your beneficial interest in the home.

This will stop the Official Receiver or trustee selling your home later.

What is meant by my ‘beneficial interest’ in my home?

This is your interest in the proceeds of sale of the property as opposed to the legal title to the property which is held by the owner.

If you are the sole owner, the beneficial interest is the whole value of the property.

If there are joint owners, the beneficial interest is usually an equal share of the value. (If there are any amounts owed on mortgages or other loans secured on the home, these will be repaid from any proceeds of the sale).

What happens to my beneficial interest and legal title to my home when I am made bankrupt?

Your beneficial interest always transfers to the Official Receiver or trustee.

If your home is solely owned, the legal title usually also transfers to the Official Receiver or trustee.

If the home is jointly owned, the legal title remains with you and the co-owner but this does not prevent the Official Receiver or trustee taking action in relation to the property.

The Official Receiver or trustee has to realise (or sell) the beneficial interest to raise money to pay your creditors.

One way of doing this is to sell the beneficial interest to your husband, wife, partner, a relative or a friend.

What should be done if someone wants to buy my beneficial interest?

If an insolvency practitioner is handling your bankruptcy, your husband, wife, partner, relative or friend should contact the insolvency practitioner for information on what to do.

If the Official Receiver is handling your bankruptcy, your husband, wife, partner, relative or friend should contact the Official Receiver.

If the home is jointly owned, they may be able to take part in a low-cost conveyancing scheme run by The Insolvency Service and a firm of solicitors.

Under this scheme, the beneficial interest and the legal title can be transferred to your husband, wife, partner, relative or friend.

The purchaser will also have to give the Official Receiver up-to-date details in writing of the amounts which would be needed to fully pay off the mortgage and any other charges on the property.

If your husband, wife, partner, relative or friend cannot afford the costs of the scheme at present, they may still be able to take part at a later date.

They should contact the Official Receiver about this. If at a later date an approach is made to the Official Receiver to purchase the beneficial interest, and the property has increased in value, it is likely that the purchase price will be more than £1.

If the home is mortgaged, the lender may have to agree to the sale - the solicitor or licensed conveyancer dealing with the transaction will be able to advise on this.

Can I buy the beneficial interest if I am sole owner of the property?

It is possible for the Official Receiver or other trustee to transfer the beneficial interest and legal title to you, your husband, wife, partner, a relative or friend but the transaction is more complicated.

If you wish to proceed in this way, please contact the Official Receiver or trustee for further details.

What happens if no-one buys the beneficial interest?

It remains with the Official Receiver or trustee.

It does not return to you on your discharge from bankruptcy.

The value of the beneficial interest may increase over time if the market value of your home increases.

The benefit of any increase in value will go the Official Receiver or trustee to pay your debts, even if the home is sold some time after you have been discharged.

You and your family will have to move out if the home has to be sold to pay your creditors.

What happens if I rent my home?

If you fail to keep to the terms of your tenancy agreement, such as not paying your rent, the landlord may take action against you.

The Official Receiver or trustee will normally have no interest in your home to sell for the benefit of creditors.

In most cases the Official Receiver or trustee will need to tell your landlord that you are bankrupt. We suggest that you seek legal advice on what may happen under your tenancy.

N.B. Are you sure declaring bankruptcy is the only option?

But before you apply for bankruptcy make sure you’re certain you’ve considered the following questions:

• Would an IVA help me in my situation?
• Would an Debt Relief Order solve my problems?

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