Bankruptcy And Your Property

Updated for 2026

If you are considering bankruptcy, one of your biggest concerns is likely to be what happens to your home. Whether you own a property outright, share ownership with a partner, or have a mortgage, bankruptcy will have a direct impact on your housing situation.

This guide covers how bankruptcy affects property ownership in England and Wales, what a trustee in bankruptcy can do, and what rights you and your family have.

How Does Bankruptcy Affect Your Property?

When you are made bankrupt, all of your assets, including any interest you hold in property, are transferred to a trustee in bankruptcy. The trustee’s job is to realise (sell or collect) your assets to repay your creditors as far as possible.

Your interest in a property includes any equity you hold. Equity is the difference between the property’s current market value and the outstanding mortgage balance. If there is positive equity, the trustee will look to recover your share of it.

It does not matter whether the property is solely in your name, solely in your partner’s name, or held jointly. The trustee will assess whether you have a beneficial interest in the property, and if so, how much that interest is worth.

Joint Ownership and Your Partner’s Share

If you jointly own a property with someone who is not bankrupt, the trustee can only claim your share of the equity. Your partner’s share is protected and cannot be used to pay your debts.

However, this does not prevent the trustee from applying to the court for a forced sale of the property to access your share. In practice, this means your partner could be forced to sell, even though their portion of the equity remains theirs.

A spouse, civil partner, relative, or friend can offer to buy your interest in the property from the trustee. This is often the simplest way to prevent a forced sale and keep the home.

Common Misconceptions About Bankruptcy and Your Home

“I transferred my home to my partner years ago, so it is safe”

This is one of the most common misunderstandings. Transferring a property to your partner does not automatically protect it from bankruptcy. The trustee can challenge any transfer of assets made at an undervalue, potentially going back up to five years before the date of the bankruptcy order.

Under sections 339 and 423 of the Insolvency Act 1986, if a property was transferred without your partner paying the full market value, the trustee can apply to the court to reverse the transaction. You will also need to account for any money received from the sale. If you have continued contributing to household costs or the mortgage, you may still be treated as having a beneficial interest in the property.

“I have a family living here, so they cannot force a sale”

Having a spouse, civil partner, or dependent children living in the property does not prevent a forced sale. It can delay it. Under section 335A of the Insolvency Act 1986, the court must consider the interests of the bankrupt’s family during the first year of bankruptcy.

After 12 months, the court will generally assume that the interests of the creditors outweigh those of the family, unless there are exceptional circumstances. This gives your family time to make alternative housing arrangements, but the property will usually still be sold.

The Trustee’s Powers Over Your Property

Registering a restriction at the Land Registry

The trustee can place a restriction on the property at the Land Registry. This prevents you from selling, remortgaging, or otherwise dealing with the property without the trustee’s consent.

The three-year time limit

Under the Enterprise Act 2002, the trustee has three years from the date of the bankruptcy order to deal with your interest in the family home. If they fail to take action within this period, your interest in the property reverts back to you automatically.

Be aware that this three-year period can be extended if the trustee’s efforts to sell are obstructed, or if the trustee applies to the court for more time. It is not a guaranteed escape route.

Charging orders

If the trustee decides not to sell the property immediately, or if a sale is not practical, they can apply for a charging order. This secures the value of your debt against the property, similar to a second mortgage. Your interest in the property is returned to you, but the charge remains.

The value of the charge is determined by the trustee and the Official Receiver, based on your percentage share of the equity at the date the charge is registered. When the property is eventually sold, this amount must be repaid from your share of the proceeds before you receive anything.

Negative Equity and Property With No Value

If your property is in negative equity, meaning the mortgage is higher than the property’s value, there is no equity for the trustee to claim. In this situation, the trustee is unlikely to take any interest in the property.

However, the trustee may still register a restriction to protect the position in case property values rise during the three-year window.

Renting During and After Bankruptcy

If you do not own a property and are renting, bankruptcy does not automatically affect your tenancy. Your landlord cannot evict you solely because you have been made bankrupt. However, if your tenancy agreement contains a clause that allows termination on insolvency, your landlord may rely on that.

After discharge from bankruptcy (usually 12 months), you are free to rent and, in theory, buy property again. Your credit record will show the bankruptcy for six years, which will make obtaining a mortgage very difficult during that period.

What Are Your Options?

If you are worried about losing your home, there are steps you can take before and during bankruptcy:

• Get your property valued independently so you know exactly how much equity is at stake
• Ask a family member or friend if they are willing and able to buy your interest from the trustee
• Consider whether a bankruptcy alternative such as an IVA or DRO might be more appropriate for your situation
• Speak to a free debt advice service such as StepChange or MoneyHelper before making any decisions

The current fee to apply for bankruptcy in England and Wales is £680. You can apply online through the GOV.UK bankruptcy application service. If your total debts are under £50,000, a Debt Relief Order (DRO) may be a better option, and since April 2024 there is no fee to apply for one.

Understanding Your Assets in Bankruptcy

Property is just one of the assets that can be affected by bankruptcy. Your car, savings, and other valuable possessions may also be claimed by the trustee. If you have income above what is needed for reasonable living expenses, you may also be required to make payments from your income for up to three years.

Understanding the full picture before you apply is essential. Read our important considerations and restrictions guide for a broader overview of what bankruptcy means in practice.

Get Free Advice

This guide provides general information only and should not be treated as financial or legal advice. Every situation is different, and the outcome of bankruptcy depends on your individual circumstances.

If you are unsure whether bankruptcy is right for you, speak to a qualified debt adviser. Free, confidential advice is available from StepChange Debt Charity and the MoneyHelper service.