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Monday, 29 November 2010 21:51

What Will Happen To My House If I Go Bankrupt?

Written by  Jon
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Question: my question is if i decided to go for bankruptcy but i am a mortage what will happen to my house iam paying my mortage but its the credit cards iam struggling to pay of would they put a claim on my house for if i decided to sell or would this not been taken into account.


Answer: You can be allowed to keep your house/property in bankruptcy, but there are a few requirements for this to occur:

Is there equity in the property? Is there is, it will be an issue.

Is the house/property in just your name? This has an impact on what can occur.

Can you afford the property/house? This also has an impact on if the Receiver/Trustee allows you to keep the house.

Below is an article from our web site that may help in explaining this.

I would also advise you to phone us to speak to an advisor as having property and going bankrupt can have issues of their own.

I hope this has answered your question.

For more information and assistance, please complete our eligibility form at our web site www.bankruptcy.org.uk or ring us at 0800 0029951.

Regards,

Jon


Information On Going Bankrupt With Property

What happens if I own property and go bankrupt?

Will I Lose my property if I go bankrupt?

What about jointly owned property if one of us goes bankrupt?

Should I just hand the keys back or wait for the house to be repossessed?

Can my partner or spouse take over my house if I go bankrupt?

How can I save my house if made bankrupt?

What happens to my property abroad in my bankruptcy?

Can I sell or transfer my property before I go bankrupt?


These and many more, are questions we receive daily from people considering going bankrupt. Keeping their homes is one of their biggest concerns about going bankrupt, and rightfully so as it is their biggest asset and investment.

So will you lose your property in bankruptcy, there are a few factors that will determine this.

One is equity, is there equity in the property?

The second is affordability, can you afford the property and all the costs associated with keeping it?

If a property has equity in it, meaning it is valued at more than any mortgage or secured loans against it, the Receiver/Trustee in a bankruptcy will probably want the property sold and the proceeds used to be paid into the bankruptcy.

This does not mean that just because a property has no equity it is safe in a bankruptcy.

The Trustee will look at affordability, can you afford the property and mortgage, is the mortgage payment disproportionate to your income(s), if you cannot afford the property or if it is in severe negative equity they may have you move to avoid any future debt.

The Receiver/Trustee could also decide to place a charge against the property for three (3) years to see if any equity rises in the property. Then review this in the three years to take any equity or force the sale of the house.

So while we can work around a few factors and rules, there is no hard and fast rule that says, if you go bankrupt you will or will not lose your house.

But what about selling or transferring it to someone prior to going bankrupt?

Nice idea, but like the Dodo will not fly.

The bankruptcy forms ask about any property you may have owned or had an interest in for the past few years, so you would need to disclose this; if you did not disclose the sale or transfer it would be fraud.

Upon disclosing the sale or transfer the Receiver/Trustee will want to now the details of the transaction and does have the authority to reverse the transaction or as I have mentioned in previous writings, chase the other person for either the property or the value of the property, even in worst case scenarios, making them bankrupt to do this.

It gets ugly and complicated, so as I always say, it is best not to sell or transfer ANY assets prior to going bankrupt.

If you are not concerned about the property and are going bankrupt, you could just wait for the property to be repossessed and move on. You can place any shortfall from a repossession in your bankruptcy as the debt is now unsecured.

For some people it can be better to seek out new accommodations, then hand the keys back to the mortgage company and then go bankrupt.

It is always best to have a place to move to and live, prior to being flung out on the street; so to speak.

But what if you own a property together with your spouse or partner and only one of you is going bankrupt??

If there is no equity in the property and you show you can afford the property, the Receiver/Trustee may allow the non-bankrupt spouse or partner to buy-out the Trustee’s interest in the property under a low cost buy-out scheme; this can be for as little as a few Quid.

If there is equity in the property, only the portion of equity that belongs to the person going bankrupt would be taken for the bankruptcy, so the non-bankrupt partner or spouse, can be given the opportunity to buy out this portion of equity by paying this amount to the bankruptcy.

If the non-bankrupt partner or spouse cannot do this, pay the amount required, then the Trustee may force the sale of the house, but only the bankrupt’s portion of the equity can be taken for the bankruptcy; the non bankrupt partner or spouse would receive their share.

It does not always have to be the non-bankrupt partner or spouse who can pay this amount to the bankruptcy, they can allow a family member or a friend to do this as well.

What about property abroad??

It is handled the same way as property here in the UK. And this goes for property anywhere in the world.

If the property is jointly owned the non-bankrupt person can be allowed to buy-out any equity or interest.

If the property is not a primary residence, meaning the bankrupt person does not live there all the time, it can be complicated and the property may not be allowed if it is in just the person going bankrupt’s name, as it can be an additional expense and could free up money that could be used to pay into the bankruptcy.

The question many people have is how will the Trustee gain access to the property in another country?

The Receiver/Trustee may have authority in that country, as in any of the EU countries, or they can apply for authority, or have the person going bankrupt assist them in the sale.

If the person going bankrupt does not or refuses to help, it can be seen as not cooperating and a restriction order may be issued.

A restriction order can keep a person under the restrictions of bankruptcy longer than the usual 12 months and for up to 15 years. So a long time.

So as you can see it is not cut and dried as to you would lose a property in bankruptcy or not.

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