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Jointly owned house and Bankruptcy

Jointly owned house and Bankruptcy

Jointly owned house and Bankruptcy

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.

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What happens to a jointly owned property if one partner goes Bankrupt?

Your share of the equity in a jointly owned property will be at risk if you go Bankrupt. Can your partner buy back your equity from the Official Receiver? What if they do not have the funds to do this? To find out more please visit:

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.

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    4 thoughts on “Jointly owned house and Bankruptcy

    1. MichelleC says:

      my partner has been away from his marital home for 11 yrs, and is thinking of going bankrupt, he hasnt paid into the morgage for over 11 yrs, would this be taken into account if he went bankrupt,i mean would the house be taken into consideration

      1. James Falla says:

        Hi MichelleC

        If your partner’s name is on the mortgage and land registry for the property in question, then if he goes bankrupt the official receiver would certainly have to consider the property. They would need to calculate what if any equity he has in it.

        I think they would want to look back at the equity situation on the date he moved out and stopped paying the mortgage. If there was any equity at that time I think they would demand at least 50% of this (being his share at the time).

        I do not think he should go bankrupt without getting advice on this first. If he or you would like to give me a call, I would be happy to have a chat with you to explain the situation and options (0800 077 6180). The advice is free and without obligation.

    2. Maurice says:

      My wife and I jointly own a 250k mortgage free property we are considering an EQUITY RELEASE to raise 50% to fund a property for our disabled son.

      I have some debts but coping OK but am facing an expensive court case which if it continues will mean I will have no option but to go bankrupt. Does this mean my wifes share of the remaining equity is at risk and my share can be taken by my official receiver.

      1. James Falla says:

        Hi Maurice

        If you go bankrupt and your wife owns 50% of your joint property, she would be able to keep 50% of any equity if the official receiver requires the property to be sold. So her half is safe. There is no issue there.

        However, if you take equity out of the property and gift it to your son, this could make things very complicated. The Official Receiver might decide that the gift to your son (whatever his circumstances) is a transaction at under value. As such the OR could demand the return of 50% of the funds you gave to him as well.

        This is a complex situation and I would urge you to give me a call before making any decisions so I can explain all the implications to you so that you can make informed decisions before gifting money to your son (0800 077 6180)

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