Published in Debt Advice Features on Wednesday, November 29 2006

A house is normally the largest purchase a person will make within their lives, as with all assets in bankruptcy it will be taken into account in bankruptcy which means it will be at risk. Read more to find out how it will be dealt with.

If you own your own home whether this is solely or jointly and is worth more than you have money outstanding on the property. (The value of the property after you have deducted the balance of any mortgage and secured loans against it)

“Known As Equity”

If you have equity in the property then this is classed as money you have and one way of releasing that money is to sell the property, which the trustee in bankruptcy will want to do. The money will be used to pay for the costs of your bankruptcy and to pay your creditors. If your wife, partner or children live in the property the sale will normally be delayed for around 12 months, allowing you and your family to make other living arrangements.

It may be possible that you can prevent sale of the property by getting a family member, friend or the joint owner of the property to purchase your share of the equity in the property, the trustee may encourage this and if you find yourself in a position where you can do this you must contact your trustee as soon as possible.

If the trustee cannot sell your home straight away then he or she can obtain a charging order on the property for the value of the equity, which will be restricted to the value of the equity at the time of the charging order plus any statutory interest until the house is sold (You will normally be allowed to live there until the trustee deals with the sale of the home). The trustee will normally have 3 years by law to deal with the property once the charging order has been obtained, if after that date they cannot deal with it then the property will be restored to the bankrupt.

A charging will normally not be made if there is negative equity or less than £1000 after charges for selling the property.