Check how bankruptcy affects your home
You might not have to move home if you go bankrupt. It depends on things like whether you rent or own your home, and who you live with.
The person who decides what should happen about your home is called the ‘official receiver’.
If you want to move after going bankrupt, it might be harder to get a mortgage or a new tenancy for several years. This is because bankruptcy stays on your credit report for 6 years.
If you rent your home
If you rent your home, it's unlikely you'll lose it by going bankrupt. The official receiver has to let you keep enough money to pay your rent.
Your landlord won't usually be told about your bankruptcy unless you're behind on your rent. This is called being in ‘arrears’.
If you’ve paid all your rent and the official receiver still wants to contact your landlord, check your tenancy agreement. If your tenancy agreement says it’s an ‘assured’, ‘protected’ or ‘secure’ tenancy, the official receiver shouldn’t tell your landlord you’ve gone bankrupt.
If your tenancy agreement says a bankrupt person can't be a tenant in your home, your landlord might let you stay if you keep paying the rent.
Your landlord might evict you if there’s another reason, like rent arrears. You can:
- check how to deal with rent arrears if you rent from a private landlord
- check how to deal with rent arrears if you rent from the council
If you own your home
If you own the home you live in, the official receiver might want to sell it to help pay your bankruptcy debts.
You mustn't give away your home or sell it for less than it's worth to try to avoid the official receiver selling it. If the official receiver finds out you've done this:
- you might have to follow extra rules called a bankruptcy restrictions order (BRO)
- you might be fined or sent to prison
- the official receiver might take your home back from the person you gave or sold it to
If you’ve already given or sold your home to someone, you can check the rules about what you did before going bankrupt.
If you still own your home, you might be able to stop or delay the official receiver selling it.
To work out what will happen about your home, you should follow these steps:
- Check if someone else has a legal right about your home
- Check if you can stop or delay the official receiver selling your home
- Check what to tell the official receiver
- Check if your support for mortgage interest might change
- Check what happens if your home hasn't been sold after 3 years
1. Check if someone else has a legal right about your home
Someone might have a legal right about your home if they either:
- live with you
- helped pay for your home - for example if they’ve paid some of the deposit or mortgage
If someone lives with you and they’re your wife, husband, civil partner or child, they have a legal right to stay in the home.
If someone has helped pay for your home, they might have a right to some of the money if your home is sold. Their share is called their ‘beneficial interest’.
Someone can have a beneficial interest even if they don’t own the home, or if they live somewhere else.
Each person’s beneficial interest is the amount of money they would get after anything secured on your home, for example mortgages or loans, has been paid back.
If you own the property jointly, the beneficial interest is normally shared equally between you and the other owners.
If another owner has paid more than you, they might be entitled to a bigger share. Talk to an adviser if you need to prove someone should have a bigger share than you.
2. Check if you can stop or delay the official receiver selling your home
You might be able to stop or delay your home from being sold if:
- someone else has a legal right about your home
- someone will buy your share of the home
- your mortgage covers most or all of what your home is worth - called ‘low or negative equity’
If someone else has a legal right about your home
The official receiver will usually only sell your home after you’ve been bankrupt for a year. This is because someone with a legal right about your home has more rights to keep it for a year after you go bankrupt.
If you need to keep your home for more than a year, you’ll need to show there are exceptional circumstances which mean you can’t move earlier. For example, you might not be able to move earlier if someone you live with:
- is at school and needs to keep the support they get from school
- has a mental health problem
- is disabled, and the house has been adapted for their needs
- is over 70 years old
If you need to keep your home for more than a year, talk to an adviser to find out whether your circumstances are exceptional.
If someone will buy your share
You might be able to stop your home from being sold if someone agrees to buy your share of it.
It's important to remember that you can't just sign over your share of your home to someone else to avoid it being sold. If you want to sell your share, you need to do it at market value.
If you own your home by yourself, you need to get the official receiver’s permission before you sell it. This is because the official receiver has control of your home once you’ve gone bankrupt.
If you own your home with someone else, you don’t need the official receiver’s permission to sell your share. You should still tell the official receiver before you sell it.
If your home is in low or negative equity
Your home won't be sold unless the value of your share is more than £1,000, after any sale costs have been taken off.
If your share is more than £1,000, the official receiver still might not sell your home. It depends how much money would be left after paying the sale costs.
At 2 years and 3 months after the bankruptcy order is made, the situation will be reviewed. If your share in the property is still low, it's unlikely the home will be sold.
The official receiver might apply for an order so they can sell your home at some time in the future, as long as you still own it. The order is called a ‘charging order’.
If the official receiver has a charging order and decides to sell your home, they have to get permission from the court first.
3. Check what to tell the official receiver
The official receiver has to take all your circumstances into account when they decide what to do about your home.
Talk to an adviser to find out which circumstances you need to tell the official receiver about.
4. Check if your support for mortgage interest might change
If you have a support for mortgage interest loan (SMI), you should also check how your SMI might change.
5. Check what happens if your home hasn't been sold after 3 years
Your beneficial interest in your home will become yours again if the official receiver hasn't done any of the following within 3 years from the date your bankruptcy order was made:
- sold your beneficial interest to someone such as your partner, friend or family member
- applied to the court for an order that you and anyone else living in your home have to leave
- applied to the court for a charging order
- come to an agreement that you will pay them the amount of your beneficial interest
If you're homeless because of bankruptcy
If you risk being made homeless because of bankruptcy or it's already happened to you, you should contact your local council as soon as possible. They will consider your circumstances to see if you're eligible for help with re-housing.
Tell the council you’re homeless because of your bankruptcy. If you lose your home because of financial problems, the council shouldn’t decide you‘ve made yourself homeless - called being ‘intentionally homeless’.
If the council say they won’t help because you’re intentionally homeless, talk to an adviser to find out if you can challenge their decision.