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Is your home at risk if your partner is bankrupt?
If your partner is declared bankrupt, you could face losing your home. However, there may be things you can do to delay or stop this from happening.
This page explains the risk to your home if your partner is bankrupt and your options if you want to keep it.
Who owns your home?
Whether or not you face losing your home if your partner is made bankrupt will partly depend on who owns it.
If you are the sole home owner, the official receiver or trustee won't usually have a claim on your home. You'd normally be classed as the sole owner if you hold the legal title to the property, and if you can show your partner wouldn't be entitled to any of the proceeds if the house was sold.
If your partner owns the home or if you own it jointly, you may face losing it. However, there may be things you can do to delay or stop this from happening.
It will also depend on how much the interest your partner has in the home is. If it's less than £1000 and doesn't increase beyond £1000 within 3 years of the date of bankruptcy, the trustee can't sell your home.
Delaying the sale
The bankruptcy trustee has to apply to the court for permission if they want to sell your home. As the partner of the bankrupt person who is living in the home, you can request for the sale to be delayed for up to 12 months from the date of the bankruptcy order. If the court grants this delay, this will give you time to find suitable alternative living arrangements.
If the trustee applies to the court and you get the sale delayed, you must find somewhere else to live within the twelve months. If you don't, the court wouldn't count this as a reason not to sell the home, so you could end up with nowhere to live.
Stopping the sale
You may have some options for stopping the sale of your home altogether.
The court may decide that there are some exceptional circumstances which mean you can keep your home or at least delay its sale. These might include:
- you have a disabled child and the house has been adapted for their needs
- you're over 70.
If you think this might apply to you, you should ask your partner to speak to the bankruptcy trustee about this. You may need to get advice about whether your circumstances are exceptional.
Buy your partner's share of the home
You can stop your home from being sold if you buy your partner's share of it. This share is called their beneficial interest. It is different to the legal title to the property, which is held by whoever owns it.
If you buy your partner's share from the trustee, this should be for the market value, minus the costs of the sale if the home was to be sold.
It's important to remember that your partner can't just sign their share of your home over to you to avoid it being sold. This is a bankruptcy offence. If the official receiver finds out you've done this, your partner could have a bankruptcy restrictions order made against them, be fined or even sent to prison.
If you can't afford to buy your partner's share of the home, you might be able to find someone else who's willing to do so, such as a family member, who'd then let you carry on living there. You and your partner should get legal advice about the implications before doing this.
If you rent your home
If you and your partner rent your home, it's unlikely you'll lose it by them going bankrupt. However, there are certain situations where your home may be at risk, including:
- if the property is included in your partner's bankruptcy estate - although this won't apply to most regulated, secure and assured tenancies. It would generally only be an issue if your partner 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.
'Bankruptcy: what will happen to my home?' - from the Insolvency Service at www.bis.gov.uk/insolvency