Can I Keep My House During Bankruptcy?

Although there are various costs associated with filing for bankruptcy, the biggest concern for many is whether or not they will lose their house. While losing your home depends entirely on the circumstances of the bankruptcy there are a number of things you must consider in order to best determine whether or not you will lose your home.

Determination of Home Loss

Depending on how much is owed to your creditors, the official trustee of your file may have no choice but to sell your home in order to pay off your debt. In most cases, the trustee avoids selling off your home unless there are no alternatives. In some cases, you may only lose the beneficial interest of your mortgage while in other cases you may lose the entire title to your home. Again, this all depends on the amount owed to your creditors. When you are the single owner of your home, the beneficial interest and home title are transferred to your trustee. That means you can’t claim anything from a sale nor sell the property. In the case of joint ownership, beneficial interest and home title are not transferred to your trustee. Instead, your property’s entry in the Land Registry is filed with a “Form J Restriction”.

This allows the court to issue an order of home sale in which your trustee will claim beneficial interest. Your trustee will also be notified of any dealings involved with your home such as an attempt to sell it. You may be able to delay or stop the sale of your home entirely if: your beneficial interest value is less than £1000, the legal title or beneficial interest can be transferred to someone else such as a spouse, or if you need time to find other living arrangements if you have children or a spouse. The latter will only delay the sale for up to a year. If you rent your property, determination of sale depends entirely upon your rental agreement. Please refer to your rental contract to find out if bankruptcy will affect your living arrangement.

Points of Interest

While there are many things to consider before filing for bankruptcy, one of the most important things to consider is whether or not you will lose your home. Before filing, consider the following: am I the single owner of the property? If I have a spouse, can the beneficial interest and home title be transferred to them? Can I delay the sale of my home to search for alternative living arrangements if I am married or have children? How will the loss of my home affect those around me and my personal day to day life? Are there any circumstances in which I may receive the beneficial interest in my home?

Are there any circumstances in which I will not lose my home or the beneficial interest in my home? If I rent will I lose my home during bankruptcy? These are all very important questions you must answer about your personal situation before filing for bankruptcy. The best way to make a determination for each of these questions is to either do the research on your own or consult a professional. While seeking outside help may incur costs you really can’t afford, sometimes it is the difference between knowing whether or not you will be living on the streets shortly.

In cases where you are a renter, please consult your rental agreement or speak to the property owner about what may happen if you file for bankruptcy. All in all, you are the only one who can determine whether or not bankruptcy is the right option for you; however, it never hurts to seek an outside source for information.

Andy Gorton is the author and editor of the Bankruptcy Clinic

Andy Gorton – who has written posts on Bankruptcy Clinic Blog.

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