When you are Bankrupt it is generally a good idea not to make big changes to your personal circumstances such as moving home. It is normally best to wait until you have been discharged as you will face fewer restrictions.

However if you cannot wait because your circumstances have changed it may still be possible to move but there are various difficulties that you will need to be aware of and plan for.

We explain why it might be best to stay put if you can but what your options are if you cannot help but move.

Is it possible to buy a house during Bankruptcy?

If you are already bankrupt and want to buy a new home it is almost certainly best to wait until you are discharged. There are two key reasons for this.

The first is that you are very unlikely to get a mortgage due to your poor credit rating. It is not possible to try and hide your situation as before offering you a mortgage any potential mortgage lender will perform a credit check which will reveal this.

The second is that even if you could get a mortgage you will also need to put down a deposit. This would have to come from a third party as any cash you have will have to be given to the Official Receiver to put towards the repayment of your debts.

If you are already a home owner and are thinking about using the equity from the sale of your current house as a deposit you should be aware that your share of this money would also have to be handed over to the Official Receiver and so would not be available to use as part or all of a deposit for a new property.

BMD Tip: Once you are discharged from Bankruptcy you will still have to wait a number of years before your credit rating starts to improve and you are able to get a mortgage. The longer you are able to wait the easier it will be to get a competitively priced deal. However this is not all negative as the wait will allow you to save for the deposit you will need.

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Can I move and rent out my home during Bankruptcy?

If you are a home owner and you simply have to move during your bankruptcy given that you are unable to buy a new home you may think that a different option could be renting out your property and moving into a rented home yourself.

Unfortunately this will not be possible because it would still put the property you own at risk. The reason for this is that as soon as you rent it out the Official Receiver will regard any rent you earn as business income and will be entitled to take this from you as an income payment.

This would render you unable to keep up with your mortgage payments and probably lead to the repossession of the property by the mortgage lender.

BMD Tip: Given that your share of any equity in your property will have to be given to the Official Receiver as part of your bankruptcy if you absolutely have to move you could consider simply handing back the keys to your mortgage lender and allowing your home to be voluntarily repossessed. This would avoid you having to wait around while you try to sell and any mortgage shortfall left after the repossession would be included in your bankruptcy.

Can I move to a rented property when I am Bankrupt?

It is possible for you to move to a rented property while you are bankrupt. However there are certain difficulties you need to be aware of.

The first of these is the fact that as your credit rating will be very poor and you are likely to fail any credit check that a letting agent carries out against you. As such if you need to use a letting agent you should be upfront about your situation. You may be able to overcome any fears they have by getting someone to act as a guarantor for your rent payments.

Of course if you are planning to move to a new property where the landlord will not carry out a credit check against you such as Council or Housing Association property or a private landlord who is personally known to you then the fact that you are bankrupt should not be an issue. Your new landlord will not be informed so it is unlikely that they would ever find out.

The other issue you need to consider if thinking about moving to new rented accommodation is the cost of the new rent payments. Generally speaking if the rent for the new property is exactly the same as that of the old then there will be no issue. However if the rent is going to be more then you will need to understand how you will be able to pay this.

If you are currently paying an Income Payment Agreement (IPA) the OR might agree to reduce this to help you with the increased rent payments but only if the move is absolutely necessary. For example your job is at risk unless you move.