What happens to your home in Bankruptcy?

You may be aware that bankruptcy affects your home as you may be required to sell it for payment towards the debts. But did you know that there are alternates that can be arranged for stopping sale of your home? Read the below guide to get to know all the information that you need to know about handling your house during the period of your bankruptcy.

Your home is one major asset that the trustee will claim to repay the debts related to your bankruptcy. The money obtained from sale on your home will be used to pay your creditors after repayment of any mortgage or secured loans taken on the house. In certain cases, if there is enough money to pay the debts by means of sale of your house, the bankruptcy charges maybe be cancelled or annulled by the court. However, even if your charges are annulled or cancelled, you would not be able to receive your right or interests back on the house property.
Before you declare bankruptcy, it is best to obtain independent advice on the effect it can cause on your home or the various other alternatives you can look out for in place of bankruptcy.

When you are declared bankrupt and your house claimed by the trustee, certain rights like the legal title and the beneficial interest in your property by default gets transferred to him. The beneficial interest is your share of the property after clearing mortgages and loans this interest will now be used by the trustee to pay your debts. In case you are the sole owner of your home, the legal ownership is also passed on to the trustee during your bankruptcy. The ownership and interest transfers are recorded in the Land Registry which is a public register of land interests used in Wales and England. A Bankruptcy Restriction Notice is normally placed on your property’s entry to confirm these transfers. The Land Charges Registry will also be affected with your home and business address being recorded in it for a period of 5 years from the start of your bankruptcy.

But in case you are a joint owner, the title and interest will not be automatically transferred to the trustee but the trustee can recommend the court to sell the house and is also eligible to claim your share of the interest when sold. He is also liable to be informed in case of any attempt or decision to sell the house. These restrictions are entered in the Land Registry and are filed under ‘Form J Restrictions’.

Your house can be claimed by your trustee even after your bankruptcy term has been ended. He holds the legal ownership rights and beneficial interests right for a period of up to 3 years from the date of bankruptcy issue. This may even be extended at time if the court has already issued an order to sell your house or you have been dishonest in disclosing about any asset details to your Official Receiver or trustee. Hence a complete co-operation with the trustee with respect to asset management is necessary to ensure a smooth process transition.

Sometimes you can delay the sale of your or even attempt to stop it. If in case the house is a family property, then the Official Receiver would delay the sale by a period of 1 year so that you are provided with adequate time to make alternate arrangements for the stay of your children or partner. In cases, where it is a joint property and if your partner or friend pays your interest amount to the trustee, the title can be transferred along with the beneficial interest. The sale can also be stopped or delayed if the value of your beneficial interest is less than £1,000 in the property. There are also exceptional cases under which they court may decide to stop or delay the sale of the property.

In case you are in a rented house, your landlord is notified about your bankruptcy status. If you have an agreement with your landlord regarding any bankruptcy clause, then you might need to get in touch with him correspondingly. But most of the times, bankruptcy does not affect housing taken on a rental basis as long as your landlord is not concerned.

Your bankruptcy does affect loss of your freehold or leased property or land but you can always seek expert guidance to stop or delay sale or choose alternate methods to bankruptcy.

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