Published in on Saturday, February 21 2009 by Ideal Debt Solutions
One of the main concerns of anyone considering bankruptcy is what will happen to their home.
Here, we try and answer some of the most frequently asked questions…
Will you lose your home?
The short answer is ‘maybe’. The Official Receiver or the trustee (when an insolvency practitioner has been appointed in place of the Official Receiver) may have to sell your home to help pay your debts. Similarly, if you haven’t been able to keep up with your mortgage payments, your mortgage lender may be able to sell your home. If you’re having trouble with mortgage payments, it’s always better to contact your lender in plenty of time and be completely honest about your difficulties. All reputable lenders are far more interested in working with you to be able to keep your home and manage your mortgage payments.
When will the Official Receiver or trustee sell your home?
If your partner or children are living with you, it may be possible for the sale to be deferred until the end of the first year of your bankruptcy in order to make alternative housing arrangements. Also, your partner, a relative or a friend may be able to buy your ‘beneficial interest’ in the home which will prevent the Official Receiver or trustee selling your home later. The beneficial interest is your interest in the proceeds of sale of the property – rather than the legal title which is held by the owner. Of course, if you are the sole owner of the house, the beneficial interest is the whole value of the property.
Your beneficial interest always transfers to the Official Receiver or trustee during bankruptcy proceedings. If you own your home outright, the legal title will also be transferred to the Official Receiver or trustee. If you jointly own your home, the legal title remains with you and the co-owner but this doesn’t prevent the Official Receiver or trustee selling the beneficial interest to raise money to pay your creditors.
How do you sell your beneficial interest?
Seek expert advice from a licensed insolvency practitioner. If a relative or friend wants to buy your beneficial interest, they should contact the insolvency practitioner for advice on how best to proceed. Alternatively, if the bankruptcy is being handled by the Official Receiver – they should contact the Official Receiver.
What happens if no-one wants to buy the beneficial interest?
In this case, the beneficial interest will remain with the Official Receiver or trustee – though it will return to you on your discharge from bankruptcy. If the beneficial interest increases in value over time, the benefit that increase will go the Official Receiver or trustee to pay your debts, even if the home is sold after your bankruptcy has been discharged.
What if you rent your home?
If you can’t keep up with the rent payments (or break any other terms of the tenancy agreement) the landlord may take action against you. The Official Receiver or trustee will usually need to tell your landlord that you are bankrupt.
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If you are experiencing financial difficulties of any sort, take expert advice sooner rather than later.