What happens to my home in bankruptcy

What happens to my home in bankruptcy? What will happen to my property in bankruptcy? If you are currently renting your property or live with family or friends then there will be no effect on the property and you will not be evicted from the property. If you are renting then just carry on paying your rent as normal, if your parents have equity in their property but you have no financial connection then it will not be touched, it is personal bankruptcy afterall!

What will happen if I have no equity in my property?

If you own your property and looking at bankruptcy as an option, as long as there is no equity it is possible to keep your property. The creditors are not interested in the physical bricks and mortar of your house – what they want is the equity that is tied up in it. If your house contains no equity at all, the Official Receiver will still take possession of the house. However, once this has happened, it is possible for a third party (relative or friend) to approach the Official Receiver and offer to buy back the title to the property for a nominal sum of £1 (plus the cost of solicitor’s fees). If you fail to do this, the Official Receiver will remain in control of the property for 3 years. If the property has accrued more value during that time, you would stand to lose that money. However, if the Official Receiver does not sell the property within 3 years, the Enterprise Act states that the property would be returned to you.

What will happen if I have equity in my property and I go bankrupt?

If you have equity in the property, you will lose control of the property and it will fall to the possession of the official receiver. The property will eventually be sold and the sale proceeds will be distributed equally amongst your creditors. If you want to stop the sale of the property then you can come up with a third party offer to buy back

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

When 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. Please note that they will have to pay:

  • for a solicitor or licensed conveyancer to act for them in the transaction;
  • £211 (as at February 1999) to cover the Official Receiver’s legal costs. This amount must be paid in advance. It includes an allowance for expenses which may be incurred in the transaction. If the allowance is not fully used, they will receive a refund;
  • the cost of an independent valuation unless you already have a very recent independent valuation of the property;
  • the agreed purchase price for the beneficial interest based on the valuation. If your home is now worth less than the amount you still owe on it, the price of the beneficial interest will be set at £1

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.

If you need more information about what happens to your home in bankruptcy give our bankruptcy experts a call on 08001303007 alternatively click on the banner below and one of our bankruptcy experts will give you a call.

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