Bankruptcy and co-ownership
Bankruptcy and co-ownership

The following Property guidance note provides comprehensive and up to date legal information covering:

  • Bankruptcy and co-ownership
  • Leases
  • Re-vesting of the bankrupt's home

When a bankruptcy order is made, a bankrupt’s property normally automatically vests in the Official Receiver/trustee in bankruptcy. However, property owned by the bankrupt on trust does not.

This means that in the case of co-owned property (whether as joint tenants or as tenants in common), where one joint proprietor is made bankrupt, only the bankrupt’s equitable interest vests in the trustee. So the co-owners can still proceed with a sale of the property and the buyer is protected by the usual overreaching machinery as long as he pays the purchase price to all the trustees etc and complies with any restrictions on the register.

Bankruptcy automatically severs a joint tenancy.

It is likely that following the bankruptcy, the Official Receiver/trustee in bankruptcy will apply for a restriction to be entered on the register in standard form J:

‘No disposition of the registered estate, other than a disposition by the proprietor of any registered charge registered before the entry of this restriction, is to be registered without a certificate signed by the applicant for registration or their conveyancer that written notice of the disposition was given to [name of trustee in bankruptcy] (the trustee in bankruptcy of [name of bankrupt person]) at [address for service].’

The co-owners can also apply for the usual Form A tenants in common restriction.

On any sale by the registered proprietors, these