Bankruptcy And Your Property
Whether the property is completely in your name, completely in your spouse’s name or in both names, typically 50% of the equity in a matrimonial home will be considered available to the Bankruptcy Trustee.
Buying a property and putting it in your spouse’s name on the off-chance you may one day be made bankrupt does not protect it from the Trustee.
In the case where a property is jointly owned, the share owned by the parties not subject to bankruptcy proceedings can’t be used towards the bankruptcy. However, this does not stop the Trustee from forcing the sale of the property to get hold of your share.
A spouse, other relative or friend can buy your interest in the home from the controlling Trustee. This prevents the future sale of the property by the Trustee.
Common Misconceptions about Bankruptcy and Your Home
“I put my home into my partner’s name years ago, it will be excluded from the Bankruptcy”
You’ll need to prove that your partner paid the full value at the time of the sale and has since paid the mortgage in full. You will also have to account for the money you received from the sale. If you have continued to contribute towards other household costs you will still be deemed to have an interest in the property.
“I have a wife and small children, they can’t take away my house”.
A forced sale may still happen. If a spouse and/or dependent children are living at the property, it is possible for the sale in the bankruptcy to be delayed until after the end of the first year of bankruptcy. This allows for time for other housing arrangements to be made.
Stopping you Selling your Home
The Trustee can register a caution at the Land Registry, preventing the home from being sold without their permission.
Under the Enterprise Act 2002 the Trustee has a maximum of three years to deal with a property or risk it reverting back to the Bankrupt. However, the three years will be extended if the sale is obstructed.
If the Trustee does not or cannot presently sell the home, they may obtain a charging order. This is like securing your total debt against the property. In which case, your interest in the property will be returned to you, but the legal charge over it remains. The value of the charge will be determined by the Trustee and Official Receiver, subject to your percentage interest in the property at the date of the charge. This sum must be paid from your share of the proceeds as and when the property is sold