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What Happens to My Property When I Go Bankrupt
What happens to your home will depend on your circumstances, i.e. do you have dependent children or do you own the property with someone else? Do you have any equity in the property?
Individual Voluntary Arrangements (IVAs)
First of all it's worth just mentioning IVAs. An IVA is an arrangement made with unsecured creditors as an alternative to bankruptcy. As it relates only to unsecured credit it will have no effect on your property and provided you keep paying your mortgage you will not be repossessed. In fact it could even help prevent you from losing your home. This is because one remedy that is sometimes available to an unsecured creditor should you default on a credit agreement is to obtain a charging order against your property followed by an order for sale, however once a sufficient majority of your creditors agree to an IVA all of your creditors are bound by it and are barred from taking any further action provided you keep to the agreement.
Bankruptcy Notices and Bankruptcy Restrictions
When a bankruptcy petition, that is an application to make you bankrupt, is lodged the land registry will register a notice against all of your properties stating that it appears that you are affected by bankruptcy proceedings. This is done to protect the priority of the trustee in bankruptcy against any dealings that are registered afterwards, such as a purchase or a loan secured on the property or perhaps a charging order. It also puts anyone interested in the property on notice that your bankruptcy may be imminent.
Once a bankruptcy order is made a restriction will be registered against the property which will prevent any further dealing (such as a sale or re-mortgage) from being registered without the consent of the trustee in bankruptcy or, if a trustee has yet to be appointed, the Official Receiver.
Bankruptcy Where the Bankrupt is the Sole Proprietor of the Property
Where the bankrupt is the sole owner of a property, once a bankruptcy order is made the legal title to the property vests in the trustee in bankruptcy (or the Official Receiver). The trustee is entitled to, and may, register himself as owner of the property. Whether or not he actually does this, he is still the legal owner and the bankrupt no longer has any right to deal with the property.
The trustee may sell the property for the benefit of your creditors however if he does he must pay any debts secured against the property (such as mortgages) which were secured before the registration of the bankruptcy notice (hence the importance of the notice). As a result he will only sell if there is sufficient equity to make a sale worthwhile.
Bankruptcy Where the Bankrupt is One of Two or More Proprietors
Where there are two or more proprietors (even if both are bankrupt) the property does not vest in the trustee in bankruptcy and the proprietors remain the legal owners. The trustee will still be entitled to all of the equity in the property however and a sale or re-mortgage cannot proceed without his consent.
If the property is held as joint tenants then bankruptcy has the effect of severing the joint tenancy so that it is thereafter held as tenants in common. This means that if the bankrupt dies his share in the equity still passes to the trustee in bankruptcy rather than to the survivor. In order to give the world notice of this a form A restriction (sometimes known as a "sole proprietorship" restriction) will be registered.
Where only one owner is bankrupt the trustee can still deal with his share but only with the consent of the non-bankrupt, so for example he might sell it to a friend or relative. It should not be possible to evict the bankrupt provided the non-bankrupt wishes him to remain.
Where both owners are bankrupt the trustee may be able to force a sale. This is because the owners in effect hold the property on trust for the benefit of the trustee.
Can I Continue Paying My Mortgage While Bankrupt?
You can and should continue paying your mortgage while bankrupt. In fact the trustee will probably encourage this since your home is probably your most valuable asset and by being repossessed its value will be diminished. Of course if the trustee is ultimately going to take possession and sell you may consider that it isn't worth spending any additional money on mortgage payments.
Will I Have to Leave My Home When I Become Bankrupt?
If there is equity in the property and you are the sole owner, or there are joint owners and both of you are bankrupt, the trustee will most likely look to sell, either immediately or in the future. Before he does so you will need to vacate. You can leave voluntarily but if you are not prepared to do so the trustee will need to obtain an order for possession followed by a warrant for eviction. The costs of any legal action will need to be deducted to from the proceeds of sale.
If there is no equity in the property at the time then the trustee will not sell immediately.
What Happens When I'm Discharged From My Bankruptcy?
Once you are made bankrupt your assets (including your property) belong to the trustee and just because you are discharged they do not return to you. You can apply to the trustee to assign the property back to you though you my have to pay a premium. If the property is not re-assigned to you then the trustee may sell it at any time, even after you have been discharged.Now that you know the challenges you face in the current property market, visit the our website and read our expert guide on how to stop repossession.Gavin Brazg is editor of www.TheAdvisory.co.uk - UK's largest free resource of free expert advice for UK House sellers.Article Source: http://EzineArticles.com/?expert=Gavin_Brazg
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Losing Your Home Part 1
Losing Your Home Part 2
Losing Your Home Part 3
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