Bankruptcy — sale and charging of the family home
Bankruptcy — sale and charging of the family home

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

  • Bankruptcy — sale and charging of the family home
  • Order for sale — rights of occupation
  • Joint ownership
  • Spouse or civil partner with no legal title
  • A bankrupt who has children
  • Exceptional circumstances
  • Charge on bankrupt’s home
  • Low value interests

When an individual is adjudicated bankrupt, their property (with the exception of an interest in various short-term residential tenancies in certain circumstances) vests in the trustee in bankruptcy. The family home (or the bankrupt’s beneficial interest in it) is often the principal asset in the bankrupt’s estate.

Order for sale — rights of occupation

The Insolvency Act 1986 (IA 1986) provides limited protection to the bankrupt where children are involved, and also to a spouse or civil partner. There is a period of one year’s grace during which an order for sale can only be made if the court considers it just and reasonable.

The court may require the bankrupt to pay to remain in occupation, but the bankrupt will not acquire any tenancy or other interest in the property.

Joint ownership

If the home is jointly owned, the bankrupt’s interest passes to their trustee. The bankruptcy has the effect of severing any joint tenancy in equity.

The trustee steps into the bankrupt’s shoes, thus taking subject to any mortgage that the bankrupt may have granted.

In considering whether to order a sale in order to realise the bankrupt’s interest, the court will make such order as it considers just and reasonable having regard to:

  1. the interests of the creditors

  2. where the property is or has been the home of the bankrupt, the bankrupt’s spouse or civil partner, former

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