Going Bankrupt and Keeping My House

How does bankruptcy affect your property or home? This article explains everything you need to know about going bankrupt and keeping your house.

You may also find this article on dealing with debt against property useful.

If I go bankrupt what happens to my house?

If you were to go Bankrupt your property would vest with the Official Receiver (OR) or Trustee overseeing the bankruptcy. This essentially means that ownership of the property reverts to them until such a time as they decide what to do with it.

If your property is jointly owned, the OR would only be interested in your share of the property. The OR will ascertain if there is any equity in the property and establish your share of it. If your share of any equity is over and above £1,000 it is likely that the OR will have an interest in it.

The OR will have three options available to him/her as to who he/she deals with the property. However, they will firstly always try to establish whether a third party (family or friend) is able to buy out your share of the equity. If this is not a possibility then the OR will either put a Charging Order against your property for your share of the equity or potentially force the sale of the property in order to release your share of the equity.

If you wish to try and avoid bankruptcy speak to a debt adviser, they will look at all debt solutions to see if an alternative to bankruptcy is possible.

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I’m living in council housing and going bankrupt, what will happen?

There are likely to be several areas that you will need to consider if you move into a council house and the answers will probably be with the council. It could be that your entitlement to benefits are affected if you move into the property. You are unlikely to not get free rent and council tax. This is probably covered fully by the benefits that you receive and therefore you have nothing additional to pay. If you move in you may have to check your tenancy agreement, notify the council and your benefits may need re-assessing.

If you need assistance with your debts, wish to look at how bankruptcy will affect you or look at other options then a call to a free debt adviser is a good starting point.

Will I lose my house if I go bankrupt?

Unfortunately, there is not a simple answer to this question. If you own your own home, it may be placed at risk by you going bankrupt. What happens is all assets or your beneficial interest in them vest with your trustee in bankruptcy.

If you have equity in your property, the trustee will want to realise that equity, which may be through selling it, but equally if a friend or family member is in a position to buy that equity by paying him the value of it, then the trustee may be happy with that.

If there is no equity in your home, this does not mean the trustee has no interest. The trustee can wait until the house’s price increases, so it’s always in your interest to reach an agreement with them about how the equity in your home will be dealt with. Trustees only have three years to deal with the family home, but they can take steps to give them longer.

Can I go bankrupt and rent a house?

If you rent your home, bankruptcy normally doesn’t affect it. But it could be put at risk if you have rent arrears and these are included in your bankruptcy.

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If my ex goes bankrupt will I lose the house?

If your ex goes bankrupt then it is likely that the OR/Trustee will still have an interest in his share of the jointly owned property. However, the OR could take into account the fact that you have been solely paying the mortgage over the last couple of years and reduce your ex-partners share accordingly (i.e. to less than 50%). You (or a friend or family member connected to you) will still be asked if it is possible for you to buy out your ex-partners share of the property, failing that the OR could either place a Charging Order against the property for your ex-partners share in it or potentially force the sale of the property to get your ex-partner’s share out of it.

Please note that your ex-partners liability towards any outstanding mortgage or unsecured debt will be removed once he goes bankrupt.

What happens if I’m living at parents house when I go bankrupt?

Your parents cannot be held liable for any of your debts and as such their home and/or possessions should not be affected by you going bankrupt. This is of course provided that you are not named on the deeds on their property as this would be considered an asset.

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