Bankruptcy and the Matrimonial Home
The Bankrupt's family home is normally the most valuable asset in the Bankruptcy Estate. The Bankrupt’s interest in the family home automatically vests in the Trustee in Bankruptcy immediately on his appointment without any conveyance, assignment or transfer.
The Trustee has a duty to sell the Bankrupt’s interest in the family home for the benefit of the bankruptcy creditors. This applies whether the family home is freehold or leasehold and whether it is solely or jointly owned.
What action can be taken against the matrimonial home? Read more
The steps that the Trustee in Bankruptcy can take in respect of the matrimonial home are:
a) Realising the Bankrupt's interest in the family home by selling it to somebody else, normally the joint owner or a family member);
b) Applying to the Court for an order for possession and sale;
c) Applying to the Court for a charging order for the value of the Trustee in Bankruptcy’s interest in the family home; or
d) Entering into a formal agreement with the Bankrupt that they will incur a specified liability to the estate in consideration of which the interest in the family home will not form part of the bankruptcy estate.
What time period does the Trustee in Bankruptcy have to take action against the matrimonial home? Read more
Where a Bankruptcy Order was made after 1 April 2004, the Trustee in Bankruptcy must take steps to deal with his interest in the Bankrupt's family home within three years of the Bankruptcy Order by.
If the Trustee in Bankruptcy does not deal with the interest within three years of the date of the bankruptcy order it will automatically re-vest in the bankrupt.
If the Trustee in Bankruptcy fails to take any steps to deal with his interest in the family home within three years of the making of the Bankruptcy Order, it falls out of the bankruptcy estate and re-vests in the Bankrupt. This is sometimes known as the "use it or lose it" rule.
There are however, limited exceptions to this three-year period, which are:
a) Where a Bankrupt has not disclosed his or her interest in the family home
Where a Bankrupt has not disclosed his or her interest in the family home within the first three months from the date of the Bankruptcy Order, the three year period which the Trustee in Bankruptcy has to deal with the Bankrupt's interest, will begin with the date on which the Official Receiver or the Trustee in Bankruptcy became aware of the family home.
b) Where there are exceptional circumstances
If there are exceptional circumstances, such as if a Bankrupt withholds necessary information causing the Trustee in Bankruptcy to suffer a delay, the Trustee in Bankruptcy may apply to the court to extend the three year period
c) Where re-vesting will enable a more efficient administration of the bankrupt’s estate
If the Official Receiver or Trustee in Bankruptcy considers that the continued vesting of the family home in the Bankrupt’s estate will be of no benefit to the creditors, or that re-vesting will enable a more efficient administration of the Bankrupt’s estate, the three year period could be reduced.
How can we help?
If you are a Bankrupt and the Official Receiver or your Trustee in Bankruptcy has contacted you to realise your interest in your family home please contact us for advice and assistance.
Alternatively, if you are the spouse of a Bankrupt or joint owner of the family home and the Official Receiver or Trustee in Bankruptcy has taken steps to realise the Bankrupt’s interest in the family home please contact us for advice and assistance.
We have experience of negotiating the purchase back of the Bankrupt’s interest in the family home and defending possession and sale proceedings.