What happens to my home or property in bankruptcy?
It is part of the duties of the Official Receiver (OR) or Trustee in Bankruptcy to maximise the return to creditors, which means they will look to extract any beneficial interest (equity) you may have in a property you own.
Your beneficial interest is defined as your share of the net proceeds from the sale of the property i.e. the difference between the sale price and any expenses such as the mortgage settlement figure and conveyancing fees. If you share entitlement then the proceeds will need to be split (usually in a ration of 1:1 if a married couple share a home in bankruptcy).
You do have the opportunity to keep your home if a family member or friend is willing and able to purchase the beneficial interest (it saves the OR a lot of time and hassle and they’d much prefer to do this). You need to contact the Official Receiver to discuss the options.
In some circumstances (if you have dependants or a partner living with you for example) you are able to defer sale of your home in bankruptcy until the end of the first year in order to give you enough time to make alternative housing arrangements.
If the Trustee hasn’t sold the property within three years of the Bankruptcy Order (commonly referred to as the ‘use it or lose it’ provision), the beneficial interest will be returned to you (as long as it is the main residence of either you or your civil partner/spouse or former civil partner/spouse and that the Trustee hasn’t obtained an order for sale, possession or charge). However, it’s worth noting that the Trustee can sell the beneficial interest to a 3rd party, who will not be subject to the same time restrictions.
Debt Advice Foundation is a registered UK charity offering free, confidential support and advice on any aspect of debt, including Bankruptcy. If you need Bankruptcy advice or would like to discuss the alternatives, please call the charity’s debt advice helpline on 0800 043 40 50 to speak to an adviser.