Bankruptcy - What happens to our house if my spouse is made bankrupt?
Author(s):Charuna Shah LL.B.
Publish Date: December 01, 2008
My spouse is about to become bankrupt. Will I lose our home?
The trustee has to deal with any equity or interest you have in a property, for the benefit of your creditors. This may mean that the property has to be sold. If the property is jointly owned the trustee may consider selling his interest in your property to a non-bankrupt joint owner. A house property that is subject to a Defence Service Homes mortgage cannot be sold by the trustee without the approval of the Secretary of the Department of Veterans' Affairs.
A secured creditor could sell your property should you be unable to meet the mortgage repayments. Any shortfall will be a debt in your bankruptcy. If a surplus exists following sale, these monies will be paid to your trustee.
If only one joint owner becomes bankrupt the trustee will become registered as a 'tenant in common' of the home with the non-bankrupt owner, or will lodge a caveat on the title to protect the bankrupt's interest. The registration of the trustee does not prevent the mortgagee selling the property if the mortgage payments fall into arrears. The jointly owned home may be sold in any of the following ways:
- the other owner has first option to buy, either for cash or by instalments, the bankrupt's interest (or share) in the home from the trustee.
- a joint owner who cannot afford to buy the bankrupt's share may agree with the trustee to sell the home. Both the trustee and the non-bankrupt joint owner usually receive equal shares of any money left over after the mortgages and expenses are paid depending on the tenancy.
- if the joint owner refuses to co-operate, the trustee can apply to the Supreme Court under the Law of Property Act 1936, for an order that the property be sold and the proceeds divided between them.
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