If I Go Bankrupt But Have Equity in My Property Can I Keep My House?

If you are a homeowner and thinking about bankruptcy you need to understand whether or not your house is at risk. We investigate how you can keep you house if you declare bankruptcy.

As a home owner, declaring yourself bankrupt does not necessarily mean that you will lose your house. However, you need to understand what will happen to your property after you are bankrupt. Some new rules were introduced at the beginning of 2011 which make the situation much clearer.

Negative equity

If your property is in negative equity at the time you go bankrupt the risk that you will lose your property is generally very low. The argument is that no value can be raised from your property to help repay your creditors.

Unless the official receiver has reason to believe that the value of your property is likely to rise significantly in the near future, then you will be allowed to simply buy back your interest in the property from the receiver for a nominal sum.

The nominal sum required will normally be one pound plus costs so could come to around £150. You should make the offer to buy back your interest immediately after you have been declared bankrupt so that you do not forget to do so.

Minimal positive equity

If there is positive equity in your property, but this is minimal. Again the risk that you will lose your home is low.

If the equity is minimal such that it would not be worth trying to sell the property to release the equity, you can buy back your your property. However, the amount you pay must be the same amount as the value of the equity. If the value of the equity is £1500, you will need to raise £1500 possibly from a friend or family member to buy your property back.

If you cannot afford to do this the official receiver is allowed to keep ownership of your property for up to 2 years and 3 months.

During this time you can make an offer to buy back your title. However, if you have not done so, after two years and three months the property must be revalued.

What if house prices change?

If after two years and three months, the equity in your property has remained the same or fallen and is less than £1000, the property is simply returned to you.

If the equity is more than £1000, then you have the option of buying it back by paying a sum equal to the value of the equity. If you cannot afford to do this and the amount of equity in the property is not significant, the official receiver will give it back to you but put a charge against it for the value of the equity.

In today's housing market the possibility of the value of your home rising significantly is generally low. However, it is important to understand that if the value of your house does rise and the equity increases considerably, the official receiver has the option to force the sale of the house to release the equity rather than putting a charge on it and returning it to you.

Significant positive equity

The highest risk that you will lose your property if you are declared bankrupt is if there is significant equity in it.

To understand "significant equity" you need to consider whether after the cost of selling your home, there would still be a sensible amount of equity left over which the official receiver could use to repay your creditors.

If the answer to this is yes, then unless a friend or family member can buy out your equity on your behalf, the risk is high that the official receiver will try to force the sale of your house.

You may well be given some time to find alternative reasonable accommodation. However, even if you are supporting a family who live with you, the OR can still force the sale of the property.

Joint ownership

When calculating the equity in your home, you need to take account of anyone who has joint ownership of the property.

If there is a joint owner, then generally speaking any equity in the property is split fifty fifty.

If you are declared bankrupt, 50 percent of the equity in the property is the joint owner's. Only your half of the equity is considered by the official receiver when deciding how the property should be dealt with.

Know where you stand

If you are considering bankruptcy but you are a home owner, it is very important to know where you stand concerning your property.

Unless you are sure that your home is in negative equity, it is normally sensible to get your property valued before going down the bankruptcy route. You can then plan how you will deal with any equity and there will be no nasty surprises. The valuation will also come in extremely useful when speaking to the official receiver and making an offer to buy back any equity that you have.

Related bankruptcy articles

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HOW TO STOP LONDON FORECLOSURE FAST

The majority of the London house dealers are thinking how I can sell my house quick to prevent foreclosure. Due to the economic crisis occurring around the globe, many of the London house owners are unable to pay off their mortgage. London situated property company has come up with choices which are quick and efficient and they can end the foreclosure. These options are safe and working.

House owner don't need to be worried about becoming repossessed with the bank. The best option to avoid repossession is by selling fast. House sellers can attain a quick house sale once they discover a company that is willing to purchase the house quick and will buy at full mortgage cost. Many estate purchasing companies ask for a discount to buy the property, generally a large one. This discount may be around 30% of today’s price. This is not specially useful to the property sellers that have minimal equity, negative equity or no equity in their property. Property sellers currently find it hard to sell since the house value has lowered beneath the mortgage value, so real estate purchasing firm that demand discounts is probably not the way out for the house seller.

If a property seller needs to end repossession quickly and have a quick house sale, utilizing the property company that is prepared to buy the house at the extensive mortgage value, even if it's within the present sale price is the solution. This company is rather less prevalent compared to the standard real estate buying firms, however the real estate firm enters and will pay the mortgage quickly, and keeps paying it till the property value increases and it's able to sell the house higher than its mortgage cost. By doing this the property company is paid for protecting the property from repossession.

Property sellers must be aware that not all property firms are there in order to save them in their recent situation. Many of them only desire to buy the property because of the minimal sale amount. The property dealers need to ensure that they select real estate firm that guarantees it will buy in the house at full mortgage price and able to accomplish quick house sale, as time is normally essential in these situations the property sellers should ask this question to start with before giving over the house to the real estate company. The Property Firm does not work on charity bases, so its searches for a way to get paid after the sale of your home. The real estate firm covers the house owner debts and continue to settle the mortgage until it is able to sell the real estate. The real estate firm usually agree a purchase price before it begins to pay the mortgage.

The good news for those property sellers who use this method to prevent repossession is that the real estate firm can purchase nine out of ten properties in their full mortgage value, and it is a great option to consider when trying preventing an ugly looming London repossession.

Don't Ignore Debt Collectors

Dealing with debt collectors is one of the most unpleasant aspects of being in financial difficulties. It's bad enough that you're having trouble making ends meet, trying to make it to the end of the month before your money runs out. That all by itself is one of the most stressful situations a person can go through, and it's ten times worse if you also have a family that's depending on you to take care of them. And in today's economy, there's the added stress of always wondering if you're going to be laid off in the coming months, and what you'll do if that happens. Add bill collectors calling you to this mix, and it's a truly desperate situation.

Dealing with debt collectors, however, is a fact of life that comes with being in debt. And as much as people despise them, these people are simply trying to make a living and feed their families just like the rest of us. They may seem like they're your personal enemies, but they're not. Don't take their collection efforts personally. And whatever you do, don't make the mistake millions of other have made, and simply bury your head in the sand and refuse to deal with the problem. That will only make the problem worse. Here are some other tips.

If they're calling you at work, tell them to stop. By law they have to, once you request it. Otherwise, as much as possible, try to be upfront with them, and try to work out some sort of reduced payment plan. They know you likely don't have the money to pay them in full, or you would've already. Do not write them a check that is going to bounce, as that will only multiply your troubles. Do not allow them to electronically debit your bank account; that's never a good idea. And use your best negotiation skills to work something out. Always remember, though - when dealing with debt collectors, the main thing is not to ignore them. You can wind up with a court judgment against you that's difficult to remove.