The Family Home in Bankruptcy

The family home is often the most important thing to consider in bankruptcy proceedings. Many of our clients have homes in negative equity and also blame the high mortgage costs as a factor in their current financial circumstances. Sometimes in this situation a bankruptcy will allow the client to walk away from their beneficial interest in a property, which will be eventually sold and any shortfall included in the bankruptcy, releasing the client from further debt. We have seen many clients in the pursuit of home ownership with mortgages of well over a thousand pounds a month, having neighbours renting similar properties for less that half of this amount.

Often our clients will tell us that the family home is to be saved in any event, whether there is negative or positive equity is not important to them. They may have great neighbours, the kids are settled at school; it could be many reasons. In most situations we can help preserve the home.

It is important to understand that declaring yourself bankrupt does not mean you have to lose your home. Creditors are not interested in your bricks and mortar, but only the beneficial interest that can be converted into cash you have in any property, whether you have title to that property or not. There are so many factors to consider and permutations, such as whether property is solely owned jointly owned, mortgaged or not, that a personal consultation with us is the best step forward to see how you stand in respect of owning assets when declaring voluntary bankruptcy.

To date we have helped many clients purchase back, at a reduced fee, the beneficial interest in their properties, advising of offers to make and obtaining valuations to the satisfaction of the trustee of the bankruptcy. The trustee has three years from the date of the bankruptcy order, or from the date of knowledge of the existence of any property vested in the bankrupts interest, to realise the same for the benefit of the creditors. Currently any bankrupt who has his/her family living at the family home has a safe period of one year following the granting of a bankruptcy order, providing mortgage payments are met, in which to make arrangement to either walk away from the property and make alternative living arrangements or securely take the property out of bankruptcy proceedings back safely in family ownership. Remember, being bankrupt means being released from debts you cannot pay. It does not mean you have to lose your family home.