What happens to my home during Bankruptcy ?
Several questions are likely to nag your mind when you are embroiled in a bankruptcy case. “Will I lose my home? When will the Official Receiver or the Insolvency Practitioner sell my home? Can I do anything to prevent my home from being sold out?”
If you have been declared bankrupt, the Official Receiver or the trustee may have to dispose of your home to pay off your debts to your lenders. It does not matter whether your home is freehold or leasehold, solely or jointly owned.
If your family members including your spouse or children are staying in the home, its sale may be delayed until the end of the first year of your bankruptcy. The reason for this is to give your family adequate time to make alternative residential arrangements. It is in their interest for them to contact the Official Receiver or trustee who is dealing with your bankruptcy.
The term 'beneficial interest' means your ‘interest in the proceeds of the sale as opposed to the legal title to the property which is held by the owner’. To explain this, if you are the sole owner of the property, the beneficial interest implies the whole value of the property. If there are several persons who own the property jointly, the beneficial interest would mean an equal share of each member in its value.
As soon as the Official Receiver is appointed, your beneficial interest is transferred to him. If you are the sole owner of the property, your legal rights will be transferred to the Official Receiver. If the property is jointly owned, the legal title will remain with you and the co-owners. This, however, does not prevent the Official Receiver or the trustee from taking action in respect of your property.
If the property is mortgaged or there are other secured loans against it, they will be paid off from its sale proceeds.
The Official Receiver or the trustee may be stopped from selling your home if your spouse, partner, friend or a relative is ready to buy the beneficial interest in it.
You may well wonder what happens to your house if no one is willing to buy the beneficial interest. In this case, it will not remain with you even if you are discharged from the bankruptcy; instead it will be transferred over to the trustee.
If the value of the property increases over the time, its benefit will go to the Official Receiver or the trustee.