what happens to my assets in bankruptcy? It is a common misconception that if you go bankrupt then you will lose all of your assets. This is definitely not the case.
Once bankrupt, you will lose control of any assets of expensive value that you own. The assets that you are allowed to keep are books, tools and other items which you need to use personally in your employment, bedding, furniture, clothing, household goods and other basic items that you and your family use in the home on a day to day basis and white goods.
You will only be asked to give up assets that belong to you, If there are expensive items in your household that you can prove they are owned by someone else either a friend or family member then they cannot be taken by the courts towards your bankruptcy. If you do own luxury and expensive items either solely or jointly with someone else then these could be taken to sell to distribute evenly between your creditors. The third party would have their half of the sale price returned to them and the half you owned would be kept by the courts towards your bankruptcy.
Household goods: No one turns up once you have been made bankrupt to size up each room to see how much value of goods are in each for them to sell in bankruptcy. The official receiver will allow you to keep the majority of your personal possessions and household goods, TVs, DVD players, washing machines, microwaves, cookers, stereo etc. If you are able to sell something and be able to buy a cheaper version then the official receiver would start questioning whether to seize that asset to go towards your creditors. Such as state of the art surround sound stereo systems or if you have recently bought yourself a brand new 3D LCD TV then you would expect these to go once you have been made bankrupt. Same rule applies if your furniture is made up of antiques that have a high resale value and would be able to refurnish your home with cheaper alternatives, then you would expect these to go also.
Vehicles, if you have a car that you need for business or to get to and from work or you use the car for work purposes then you will normally be allowed to keep it only if its seen to be of reasonable value and does not exceed £1000 resale value. If it does exceed this figure then the courts will consider this an asset and would force sale of the vehicle. You will be allowed to buy a cheaper vehicle and the difference would be distributed towards your creditors. You can stop the sale of the vehicle if a 3rd party offer is made to buy out the beneficial interest in the vehicle. Motability vehicles are exempt from the bankruptcy.
Your home and properties.
Rented: If you live in rented property, this will not be effected by you going bankrupt. The landlord may be informed but as long as you maintain your rent payments, the majority of landlords will be more than happy for you to continue renting with them.
Owned property: If you own your own property and there is little or no equity in the property, you may find you can keep the property once you have been made bankrupt. The creditors and official receiver are not interested in the property but any money that could be taken from the property to distribute evenly between the creditors. If there is no equity at all, the official receiver will still take legal possession of the house, then a 3rd party offer can buy back the deeds of the property for a nominal sum of £1 (plus solicitors fee). If you do not do this then it will remain in control of the official receiver for up to 3 years and if the property has gained value, you will lose this also. If he has failed to do anything with the property within 3 years then under the enterprise act the property would be returned to your possession. If you own land freehold or lease hold then this will automatically be seen as an assets and will be passed to the courts. Again a third party offer will take preference to stop the sale of the land.
Joint property: If you file for bankruptcy and are in a jointly owned property, regardless of the other parties financial situation, the assets will still be seized regardless. However the courts will only be able to take the share of equity for the person going bankrupt and the rest of the equity will be returned to the other party. If you want to keep the property then the other party or a 3rd party can come up with an offer to buy back the beneficial interest to stop the sale.
Pensions: Pensions are not usually counted as an asset in bankruptcy and therefore are not touched by the courts, creditors or official receiver to go towards your bankruptcy. However you may be asked to stop payments into your pension for the duration of your bankruptcy.
What happens if i win the lottery: Any windfall you receive during the period of your bankruptcy (usually 12 months) would be seized by the court to go towards your bankruptcy. However once you have been discharged you will be allowed to keep any lump sums you receive even if you have been subject to an income payment agreement.
Can I transfer my assets so that they won’t be taken by the bankruptcy? No, the courts always check to see if you have transferred any assets or sold them for less than there real value over the past 5 years. If they find out then they will reverse the transaction and you could face an bankruptcy restriction order for trying to lie on your bankruptcy forms which are a legally binding document.