Bankruptcy and your home

When a person becomes bankrupt their interest in a property is taken over by a "trustee in bankruptcy".

If the property is in that persons name only then the trustee in bankruptcy can sell the property. If the property is jointly owned with another person then the trustee in bankruptcy can only claim the bankrupt's share of the property.

However, the trustee can apply for an order for sale to convert the bankrupt's share into money. This will have an effect on the other joint owner if they do not want to sell.

When deciding whether to make an order for sale the court will have to consider:

a) The interests of the bankrupt's creditors.

b) The needs of any husband or wife of the bankrupt living in the house and what finances they have available to them and whether they contributed to the bankruptcy.

c) The needs of the children.

d) Any other circumstances, (but they do not have to take into account the needs of the bankrupt).

Once a person has been bankrupt for at least 12 months the courts tend to favour the interests of their creditors and are more likely to grant an order for sale of the property.

It may be possible to reach agreement with the trustee in bankruptcy to allow the other joint owner to stay in the property as long as they pay the mortgage and bills, (especially if the property has a negative equity).

Human Rights Act 1998 and your home

Private Housing