The deciding factor is whether there is any equity in the property, or not. If there is no equity, you will be able to continue living in the property, provided you maintain mortgage payments. The Official Receiver will review the equity situation 27 months later and if the position is unchanged i.e. there is still no equity, he will release his interest in the property and cannot revisit the case at a later date.
The Official Receiver has options when it comes to properties in Bankruptcy
But what happens if there is equity after 27 months? The Official Receiver has options: he will almost certainly initially invite you or a 3rd party to ‘buy his interest’ in the property for a to-be-decided sum. If this is not possible, the likely outcome is that a charge will be placed against the property, to be redeemed upon its eventual sale.
Before you start punching the air, you need to bear in mind that this charge will attract interest at 8% per annum and this could add up over the years. On a positive note, we’ve only heard of one case where this actually took place.
Many people make the mistake of opting for Individual Voluntary Arrangements (IVAs) when there is a property involved, as they believe this will protect it, but as explained earlier this is unnecessary – and very costly – if there is no equity.
You need to bear in mind that all of these IVAs have 4th year re-mortgage clauses buried deep in the small print, which obliges a person to refinance the property to release equity. Seeing this is impossible, the person is stuck in the IVA for six or seven years.
‘Will I lose my home in bankruptcy’ is just one of hundreds of questions we’ve answered over the years, but feel free to call us on 01425 600129 if you have any more questions or need bankruptcy help. We are here to help.