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What happens to my house when I go bankrupt?
A person called a Trustee takes control of your things when you go bankrupt. They will look to see if your home has something called ‘equity’.
Equity is the extra value in your home. It is the amount your house is worth today, minus the money you still owe on your mortgage.
For example, if you bought your house for £130,000 and it is now worth £170,000, you have £40,000 of equity.
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Will my home be sold?
If your home has enough equity to pay off a large amount of your debt, the Trustee might ask you to sell it. They have up to three years to make a decision. This gives you time to plan. You can continue living in your home until a decision is made.
If your home has no equity, it probably won’t be sold. However, the Trustee stays in control for three years. If your house goes up in value during that time, they might look at it again.
How do I protect my home?
If the Trustee decides your home needs to be sold, there is another option. A partner, friend or family member can buy your share of the equity. If they do this, the house will not be sold and you can continue to live there.
You must follow the rules very carefully. You cannot give your house away to avoid losing it. You also cannot sell it for less than it is worth.
Paying your mortgage during bankruptcy
You must keep paying your normal mortgage payments. Bankruptcy does not clear this debt because it is a secured debt that is tied to your house.
What happens to my car when I go bankrupt?
We know that having a car is important. It gives you freedom to travel where you need to go. When you go bankrupt, you might have to give up your car. But sometimes you can keep it. It depends on your money situation.
If you own your car outright
If you’ve paid for your car completely, you might be allowed to keep it. The Trustee will let you keep it if you really need it. They might say you need your car if:
- You need it to do your job.
- You cannot get to work or school without it.
- You or someone you live with has a disability.
If your car is essential for work and has significant value, it will be sold, and you will be allowed to keep up to £3,250 for a replacement vehicle. The leftover money will go towards paying your debts.
If you’re paying for your car on finance
If you’ve got a Hire Purchase agreement, the car belongs to the lender until you finish paying for it.
You might be able to keep the car if you really need it and can keep making your payments. You should check your contract to see what happens if you go bankrupt. The lender will need to decide if you can keep the car or if they need to take it back. You will also need the permission of the Trustee to continue making payments on a Hire Purchase agreement.
What happens to my partner’s assets?
When you’re dealing with debt, it’s normal to worry about how it will affect the people you care about. The good news is that going bankrupt only affects your things. It does not affect the things that belong to your partner.
Your partner can keep their own wages, savings and any expensive items they own themselves as they’re independent of your own.
Giving gifts to your partner
You must never give away expensive things or sell them cheaply to your partner to hide them. This is against the law and can get you into very serious trouble. It can also make your bankruptcy last for up to 15 years instead of just one year.
If you have given your partner expensive gifts in the past five years, like jewellery or a car, these might need to be given back. The Trustee managing your bankruptcy can ask for these items so they can be sold to help pay what you owe.
Thinking about bankruptcy but unsure what’s right for you?
Get free debt advice online or call 0800 316 1833 to speak to one of our experts. We’ll explain the solutions available, check what you may be eligible for and help you choose the option that best fits your situation.
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