Bankruptcy and my mortgage
If you live in a mortgaged property with some equity, the official receiver will normally sell it. Some money from the sale will be used to pay the official receiver’s costs and some will be shared out among your creditors.
If you own your home in your sole name, the official receiver will want all of your equity. If you own your home jointly, they’ll only want your share of the equity.
Depending on how much equity is available, the official receiver may either:
- Sell your home, or
- Put a charging order on your home so they get the equity paid to them if you sell your home at a later date
If you want to stay in your home, the official receiver will usually allow someone else to pay them an amount equivalent to your equity. If a friend or family member can pay the official receiver, you may be able to stay in your home.
If there’s less than £1,000 equity or negative equity in your home when you go bankrupt, the official receiver won’t sell it straight away.
Instead, your case will be reviewed two years and three months from the date they become aware of the property (usually the time you go bankrupt).
If there’s still no equity at this point, the official receiver will usually let you keep your home.
However, if there’s more than £1,000 equity in your home at this point they’ll consider selling it. You’ll then have a further nine months to arrange a sale, so it could be up to three years after the date of your bankruptcy before your house is sold.
If your home is sold, you’ll usually be given a year to find a rented property and move.
If you give up your home after bankruptcy and there’s negative equity, this debt will be included in your bankruptcy. You won’t have to pay it back.