A jointly owned house is at risk if one of the parties goes bankrupt. Their share of the equity must be released for the creditors.

Jump to article content:

• Is a jointly owned house at risk in bankruptcy?
• What happens to your equity?
• What if there is negative equity?
• Can the OR force the house to be sold?

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Is a jointly owned house at risk in Bankruptcy?

When you own a property in joint names you might think it is protected if you go bankrupt. However this is not the case.

The Official Receiver is still required to investigate whether there is any equity in the property. If there is they must take action to release your share for the benefit of your creditors.

Only your share of the equity is at risk. The other owner’s share cannot be touched. However the very fact that yours has to be released will have implications for them as well.

It is assumed you own 50% of any equity in a property in joint names unless the other person can prove they have a claim on a larger amount.

What happens to your Equity in the Property?

The money the Official Receiver raises from releasing your share of any equity in a property in joint names is ultimately used to pay your creditors. However they do not have to take action immediately.

In fact they have up to 3 years to release your equity. As such they may not even bring it up with you at your interview. However you can protect your home at any time. This is done by making a reasonable offer to buy “back your interest”.

Buying back your interest is achieved by paying the Official Receiver a cash lump sum. The amount required normally has to be equal to the value of your share of the equity. This must be calculated based on an independent valuation taken within the last 3 months.

If house prices in your area are likely to rise in the next 3 years you should buy back your interest as soon as possible. The longer you wait the more you will have to pay.

What if a jointly owned house is in Negative Equity?

If your property in joint names is in negative equity the Official Receiver will not take any immediate action. They will wait to see whether the value and thus the equity increases over the next 3 years.

After that time if there is still negative equity or the equity is less than £1000 your interest is simply returned to you. Your property is then no longer at risk and you do not have to do anything else to protect it.

However if there is equity after 3 years your share will have to be released. Given this if you think property prises are likely to rise you can buy back your interest straight away. You will have to pay £1000 plus solicitors fees

Once you have bought back your interest in your property further increases in equity are yours and the other joint owner’s to keep.

Can the Official Receiver Force a House in Joint Names to be Sold?

There may be equity in your property but sufficient funds cannot be raised to buy back your share. In this situation the Official Receiver is likely to have no other option than apply to the Court for a forced sale.

The fact that the property is owned in joint names will not protect it. Even if the other owner objects and refuses to sell the Court will almost certainly side with the Official Receiver and issue the sale Order regardless.

The Court will argue that the rights of the creditors cannot be outweighed by those of a joint owner. Once the property is sold the other owner will not be left out of pocket. They will always receive their fair share of the equity released.

If the costs associated with a forced sale would be greater than the value of any equity released such action may not be taken. The Official Receiver may simply apply for a charge against the property instead.