According to the latest Money Charity statistics, 54 properties are repossessed in the UK every day. That’s one every 26 minutes and 30 seconds. So if you end up having your home repossessed and sold as a result of declaring bankruptcy, you won’t be alone. But how likely is it that you’ll lose your home and what happens when a repossession goes ahead?
This article from bankruptcy experts, Bankruptcy Clinic, provides an overview of the key points to consider if you’re looking at bankruptcy as an option for dealing with your debts.
When is a property likely to be sold?
The Official Receiver (OR) may decide to sell your home if you’re the sole owner of a wholly-owned property, or a mortgaged house or flat with equity. If you own your home jointly with another person, the OR can still order your home to be sold, but they can only take your share of the proceeds.
If you want to stay in your home, this may be possible if someone else is willing to buy your interest in it (this can happen with both sole and joint ownership). If this is the case, the OR will normally agree to this as an alternative to selling the property.
The OR may delay the sale of your home if:
- You have family or other dependents living with you. The OR may agree to put the sale off for 12 months, to give you a chance to find somewhere else to live.
- You have less than £1,000 of equity, or negative equity. The OR will wait two years and three months before looking to sell your home. After this time, they may sell it if you have more than £1,000 of equity.
The OR only has three years from the date of your Bankruptcy Order to take action around selling your home. After this, the interest in the property reverts to you. However, if the OR thinks they may be unable to force the sale of your home within three years, they may apply for a Charging Order instead. This entitles them to receive your share of the equity if you sell your home at a later date.
What happens if repossession goes ahead?
If the OR decides that your property must be sold, you’ll normally be given up to 12 months to find a new home. After that, the OR will apply to the court for an Order for Sale.
It’s possible to oppose this in the court, for example, by asking for more time to sell or re-mortgage the property voluntarily. Your appeal is less likely to succeed if you live alone, or if your Bankruptcy Order was made some time ago.
Once the Order of Sale is in place, the court will order you and anyone else living in the property to vacate it by a certain date. They will enforce eviction if you don’t comply. The locks on the property will be changed and it will be sold as quickly as possible.
What happens after the sale?
The OR will receive the proceeds from the sale after your mortgage has been paid off and all legal and conveyancing fees have been paid. The funds will then be distributed between your creditors. If there’s enough money to pay off all your debts, plus the OR’s costs, then your bankruptcy may be discharged early and you should receive the surplus amount.
If you still have outstanding debts after the sale, your bankruptcy period will continue as set out in your Bankruptcy Order.
Where will I live?
If you haven’t managed to find somewhere to live by the date your property is to be repossessed, help may be available from your local authority. You should contact them as soon as possible to find out if you’re eligible for help with housing. Priority will be given to families and single parents with young children, elderly people and other vulnerable groups.
Can I avoid repossession in the first place?
Possibly, if you can find someone to buy your share of the equity in the property and the OR agrees to this, as explained above. Another option is to sell your home voluntarily during the 12 month grace period and hand the proceeds over to the OR. This might generate more money, as repossessed properties are often sold at auction for less than their value.
You can also get your mortgage lender to repossess your home voluntarily. Simply stop paying the mortgage, move out and tell your lender that you’re declaring bankruptcy and want them to repossess the property. By doing this, your mortgage becomes part of your bankruptcy estate. So if the proceeds of selling your home don’t cover the full amount owed, the outstanding balance will be wiped out when your bankruptcy is discharged.
Of course, this is only an option if you don’t want to live in the house anymore and have somewhere you can move into. There are also various risks and legal issues that you’ll need to consider, so take expert advice before going ahead.
Bankruptcy Clinic are here to help
If you’re in debt and worried that your home might be repossessed, ask Bankruptcy Clinic for advice. We’ll help you find the right debt solution for your circumstances – whether that’s bankruptcy or a different option that puts your home at less risk.
The sooner you contact us, the sooner you can start getting your finances under control. Our friendly advisers are here to help, not judge, and there’s nothing to lose by asking us for information and advice.
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