Ask anyone who has faced Bankruptcy what their biggest fear was, and you will get the same answer every time: Losing their home.

Unfortunately, if your home has any value, it will be in the crosshairs as an asset to seize and sell to recover funds for your creditors. However, each case is different and this is not a guaranteed outcome.

There are various strategies available and Bankruptcy doesn’t always have to be seen as a negative process. For many, it is a chance to wipe the slate clean. Read on to find out exactly what will happen to your home if you’re declared Bankrupt.

What Happens to my House During Bankruptcy?

Firstly, you need to establish whether your home is in positive or negative equity. If your home is in negative equity and it’s unlikely to rise in equity in the next 3 years, then it may mean your home is ‘safe’ in Bankruptcy. The Insolvency Service or Trustee has 3 years to decide what to do with your property. They can either return the property back to you if it is in negative equity or sell it if it is in positive equity.

It’s important to note that there is no right to stay in the house for 3 years. When you cannot reach an agreement with the Insolvency Service or Trustee then repossession proceedings tend to commence imminently. We have seen this happen after 3 months from the date of Bankruptcy.

If you have dependent children in the property, then the Trustee may allow 1 year before commencing repossession proceedings. Some may believe it beneficial to wait 1 year before negotiating on the interest with the Trustee, however, we would ask you to think commercially. If you are paying your mortgage, then all you are doing is increasing the Trustee’s interest in your property by reducing the capital each month and increasing the equity.

If it is found to be in positive equity, you will have to try and raise the Insolvency Service/Trustee’s equitable interest in your property. If you cannot raise this, the Insolvency Service or Trustee can force the sale of your home. There are very few cases in which you would be allowed to keep your home. Even so, this will likely only delay the sale, not prevent it.

If you own a property and it is sold, the money from this will be shared between your creditors.

Visit the Insolvency Service to find out more about the details of this process.

Appointment of a Trustee

When you are declared Bankrupt, you will be contacted by the Insolvency Service who will appoint The Official Receiver (OR), their role is to appoint an examiner to review your assets and finances. Once the initial information is gathered, the Official Receiver may outsource your case to a Trustee.

In practice, if there is more than £15,000 of positive equity in your home, a Trustee will be appointed. If the equity is below £15,000 then this will likely be dealt with by the Official Receiver and negotiations will be with them.

The appointment of a Trustee in Bankruptcy is a critical moment. A Trustee is independent and acts for the benefit of the creditors. It’s crucial from the outset to understand the motivation of your Trustee within your Bankruptcy. The Trustee’s sole responsibility is to recover and sell your assets. The proceeds from these are used to pay your creditors whilst ensuring the Trustee’s fees are paid first.

The main piece of advice we always give to clients is the importance of staying commercial and looking at the bigger picture. We understand it can feel very personal and there are emotions involved however, at the right moment, with the right advice, you have a chance to start negotiations.

Can I Sell my House in Bankruptcy?

We’ve had many instances where people think they can outsmart the Trustee by selling their home prior to Bankruptcy, this is not a very practical approach. If you sell your home for less than it is worth you could face serious issues. Furthermore, you cannot transfer your property or share of a property to anyone else prior to your Bankruptcy.

The Trustee also has the power to apply to the court to overturn any sale and return the property to you. This then allows them to repossess and sell it. They can do this for sales up to 5 years prior to your Bankruptcy. This period can be extended if there is evidence to suggest you were already facing financial difficulties at the time of sale/transfer.

What if You Share Your Home?

If you jointly own a property with another third party, you will have an ‘interest’ in the property. Your share of the property is usually equal but it can depend on aspects such as tenants, deposits, mortgage repayments, and the maintenance of the property.

We know what you are thinking, the answer is no. This does not stop the Trustee from selling the property. Instead, the other person’s beneficial interest will be paid to them when the house is sold.

If you think this may affect you, call us today on 0330 159 5820 for advice as this can be an extremely complex aspect of Bankruptcy.

The Difference Advice Can Make

By getting help from experts, you can not only save your family home but save yourself from facing gruelling negotiations alone. It is all too common to try and ignore the issue. It is a natural action when faced with the stress of Bankruptcy but, it is entirely the wrong approach.

The fact is if the right steps are taken your family home can be saved, and Bell & Company can assist.

More: Find out everything you need to know about Bankruptcy in our latest FREE guide.

How Bell & Company Can Help

Our team of consultants completes a thorough due diligence process where we investigate your entire situation. From this, we devise a tailored strategy that will reach a favourable outcome for you and your family. We assess the level of equity in your home, whether you or anyone else has a beneficial interest and exactly how best to negotiate this with your Trustee.

By using strategy and experience in similar situations, Bell & Company will be able to help you take advantage of the options that are available to you.

Personal Insolvency and Bankruptcy are highly stressful situations to navigate through, but they do not have to be all-consuming. With the right help, everything is up for negotiation.

Call us today on 0330 159 5820. It’s a phone call to save your home and start you on the road to recovery.

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Your first consultation with us is completely free and you are under no obligation to proceed with us. However, it involves a thorough financial review and a tactical assessment of your various alternatives. We are assured you will leave the meeting with a clear understanding of your options and possible outcomes.

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