Will you lose your home? - bankruptcy
If you go bankrupt, you may end up losing your home. That means it's important you work out how likely you are to lose your home if you go bankrupt and put plans in place for what you'll do if this happens.
This page explains when you might lose your home if you go bankrupt and what your options are if this happens to you.
Rent and mortgage arrears
Even if you won't lose your home as part of the bankruptcy, it may still be at risk if you're behind on your rent or mortgage payments. The landlord or mortgage lender can still take action to recover the property if you're in arrears.
If you rent, your landlord can also take action to get their property back for other reasons, such as if you're always late paying the rent or you've broken other terms of your tenancy agreement.
If you own your home
If you own the home you live in, the official receiver or bankruptcy trustee may want to sell it to help pay your bankruptcy debts. This applies whether your home is freehold or leasehold, and whether you own it on your own or jointly with another person.
You mustn't give away your home to another person or sell it for less than it's worth to try to avoid the official receiver selling it.
If you have a support for mortgage interest loan (SMI), you must tell the DWP you’ve gone bankrupt. They might stop paying you SMI. Contact your nearest Citizens Advice if you need help working out how to afford your mortgage.
Brexit - if the UK leaves the EU with no deal
If you owe money to people or companies in the EU, your creditors won’t be able to take your home if it’s in the UK.
If you live in the UK but have a home in the EU with a mortgage from an EU lender, the lender could take you to court in the EU.
Get legal advice if you have creditors in the EU. Find free or affordable legal help.
Can you stop your home from being sold?
There are some situations where you may be able to prevent or delay your home from being sold.
If you have family or dependants living in your home
If you have family or dependants living in your home, it may be possible for a sale to be put off for a year, to give you time to make other living arrangements.
If someone will buy your share
You may be able to stop your home from being sold if your partner, spouse, relative or friend will agree to buy your share of it. This share is called your beneficial interest. It is the amount of money you would get if you sold your home after anything secured on it, for example mortgages or loans, have been taken off. It is different to the legal title to the property, which is held by whoever owns it.
If you're the sole owner, your beneficial interest is normally the whole value of the property, minus anything secured on it.
If you own the property jointly, the amount of your beneficial interest is normally this amount shared equally between you and the other owners.
It's important to remember that you can't just sign over your share of your home to someone else to avoid it being sold. This is a bankruptcy offence. If the official receiver finds out you've done this, you could have a bankruptcy restrictions order made against you, be fined, or even sent to prison. If you want to sell your share, you need to do it at market value.
Top tipIf you have equity in your home, think about whether you could re-mortgage or sell it in order to avoid going bankrupt.
If your home is in negative equity
If your home is in negative equity, then you may be able to keep it. It won't be sold unless the value of your share is more than £1000, after any sale costs have been taken off.
At two years and three months after the bankruptcy order is made, the situation will be reviewed. If your interest in the property is still valued at less than £1000, it's unlikely the home will be sold and it will transfer back to you.
If your home hasn't been dealt with
The official receiver or trustee has three years to take action in relation to your home. Your interest in your home will become yours again if they haven't done any of the following within three years from the date your bankruptcy order was made:
- sold your beneficial interest to someone such as your partner, friend or family member
- applied to the court for an order that you and anyone else living in your home have to leave
- applied to the court for a charging order
- come to an agreement that you will pay them the amount of your beneficial interest.
If you rent your home
If you rent your home, it's unlikely you'll lose it by going bankrupt. However, there are certain situations where your home may be at risk, including:
- if the property is included in the bankruptcy estate - although this won't apply to most regulated, secure and assured tenancies. It would generally only be an issue if you benefited financially in some way from your tenancy agreement
- if your tenancy agreement says a bankrupt person can't be a tenant in your home
- if there are rent arrears, other grounds for possession or a postponed possession order already in place.
If any of these apply to you, you should get specialist housing advice.
Rehousing if you're homeless because of bankruptcy
If you risk being made homeless because of bankruptcy or it's already happened to you, you should contact your local authority as soon as possible. They will consider your circumstances to see if you're eligible for help with re-housing.
If you've sold your home in a bid to avoid going bankrupt, the local authority may not help you with alternative housing, as it may decide you're intentionally homeless. However, you should speak to your local authority at as early a stage as possible if this is likely to apply to you.
'Guide to Bankruptcy' - from the Insolvency Service at www.gov.uk