Questions you have before making a decision to go Bankrupt and the Bankruptcy process

Moderators: TalbotWoods, JaneClack

By James Carlton
#472388 Am considering bankruptcy to clear various unsecured loans, CCs, other debt, etc, totalling approx £80k.

Have house valued at £135k. Mortgage OS at £55k. Secured Loan at £22k. Secured bank Overdraft at £22k.

Am I correct that this leave equity of £36k, split 50/50 with my wife as co-owner.

Total personal equity £18k.

I understand that it is possible for co-owner to buy equity back to prevent sale of house.

My questions on this are:

1) Is the buy back option always open, or can an OR just decide at random whether or not he will offer this option.

2) Does the equity have to be bought back in a lump sum, or could this be paid of over a period of, say, a year, in manageable instalments?

3) I understand it is usually possible to stay in house for a year, but is this the norm - could OR decide to sell the house, say, a few months in and simply not entertain any buy back offers, leaving us high and dry?

Any advice and clarification on the above appreciated.

I'm convinced bankruptcy is the route but need to know exactly where I would stand as regards the house before taking the plunge - have heard so many myths! Over and above any other considerations, I would not want to lose the house.

Thanks.
User avatar
By JaneClack
#472390 Hello

Yes, you are exactly right - the equity is what is left over when you deduct the mortgage, secured loan and secured overdraft. You are entitled to 50% of this - but also the OR/Trustee will take into account selling costs so your partner or another third party could buy your beneficial interest from him for somewhat less than the £18K at present.

However, the OR/Trustee has three years in which to claim your beneficial interest in the property. Thus it will be "parked" for 2 years and 3 months before any valuation etc then has to be made for the person to buy it.
They are not going to want to realise the equity now as they will be hoping of course that it increases.

You can find information on this on the insolvency website and on National Debtline's factsheet on bankruptcy.
By James Carlton
#472392
Sarah wrote:Hello


However, the OR/Trustee has three years in which to claim your beneficial interest in the property. Thus it will be "parked" for 2 years and 3 months before any valuation etc then has to be made for the person to buy it.
They are not going to want to realise the equity now as they will be hoping of course that it increases..


Thank you for your helpful reply Sarah.

Can you clarify though
1) Can the OR/Trustee refuse to enter into any negotiation and simply sell the property if he wishes.
2) Can the OR/Trustee for any reason decide to realise the equity BEFORE the 2 yrs 3 months are up?
3) Does the equity have to be bought back in a lump sum, or could this be paid in manageable instalments?
User avatar
By JaneClack
#472394 S/he is extremely unlikely to want to realise this before as the law states that the beneficial interest is vested in the OR/Trustee for three years and they will want to maximise any benefit to the bankruptcy estate.

S/he will not refuse to enter into negotiations - it is in their interest too. They only force sales when a bankrupt or discharged bankrupt (as you would be discharged before this happened) refuses to co-operate with them.

You need to discuss this with the OR/Trustee - it is generally bought back in one lump sum but of course your wife could be saving well before so the money is there to buy it back when necessary.