If you own your home jointly and one of the co-owners is made bankrupt, you may face losing it. Depending on your circumstances, you may be able to stop or delay your home from being sold.
This is also dependent on the amount of interest the bankrupt co-owner has in the property. Where the interest is less than £1,000 and doesn’t increase beyond £1,000 within 3 years from the date of bankruptcy, then the home cannot usually be sold.
Where a co-owner has a legal and beneficial interest in the home and refuses to sell the property, the trustee in bankruptcy (the person who oversees the bankruptcy case in question) can apply to the court for an order of sale. If the property is sold, only the bankrupt's share of the proceeds of sale will vest in the estate.
It is at the court’s discretion to order a sale. This decision is based on a balancing act between the interest of the co-owner, and the creditors being kept from recovering their money by enforcing the charging order.
When a court is making such an order they take many factors into consideration. These factors include:
the interests of the bankrupt's creditors
the conduct of the current or former spouse/civil partner in contributing to the bankruptcy, their needs and financial resources, and the needs of any children
all the circumstances of the case other than the needs of the bankrupt.
Delaying the sale
The partner of the bankrupt individual who is living in the home, can typically request for the sale of the property to be delayed for up to 12 months from the date of the bankruptcy order. This is to allow the partner to find somewhere else to live.
Stopping the sale
The partner of the bankrupt individual who is living in the home may be able to stop the sale of the property altogether. The sale of the home can usually be stopped because of exceptional circumstances or by the solvent partner purchasing their partner’s share of the house.
The court may delay or stop the sale of the home altogether if they find that there are exceptional circumstances. Such exceptional circumstances include:
Buying your partner's share of the home
The sale of the house may be stopped by the other partner purchasing the share of the house belonging to the bankrupt homeowner. Such a share should be bought from the trustees in bankruptcy, for market value minus the costs of the sale if the home was to be sold.
Note that the bankrupt homeowner cannot simply sign over their share in the property in order to avoid the sale of the property. This amounts to a bankruptcy offence and may result in a bankruptcy order being made or imprisonment.