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In personal insolvency, the bankrupt is usually most concerned about what will happen to his/her home. The largest potential asset in a bankrupt’s estate is usually a beneficial interest in the family home. In respect of England and Wales, the treatment of the bankrupt’s home and, specifically, whether the appointed trustee in bankruptcy (the ‘trustee’) has the right to force its sale is determined by the Insolvency Act 1986 (as amended), and the Enterprise Act 2002. Scotland has its own separate bankruptcy law (known as sequestration).

On bankruptcy, assets that form part of the bankrupt’s estate pass to the trustee and, subject to certain exceptions, the trustee may act in relation to them as he thinks necessary for the benefit of the creditors. This means that the trustee may need to sell the bankrupt’s home if this is the only way to raise money to repay creditors. This applies whether the home is freehold or leasehold or whether it is solely or jointly owned. However, it may be possible for the sale to be postponed until the end of the first year after the date of the bankruptcy order if a spouse or children live with the bankrupt. After that time, the court will only refuse an order for sale in exceptional circumstances.

Under section 283(A) of the Enterprise Act 2002, the trustee has three years in which to deal with the bankrupt’s home. There are a number of options available to the trustee, not just sale, for example he could apply for a charging order on the property. If the trustee does nothing (which is unlikely) his/her interest in the property will revert back to the bankrupt. For bankruptcy orders made after 1 April 2004, the three years period in which the trustee must act begins to run from the date of the bankruptcy order.

The purpose of this Commons briefing paper is to provide a general outline of what will happen to the bankrupt’s home under current insolvency legislation. However, it should be emphasised that anyone made bankrupt (or considering bankruptcy) should seek proper legal advice based on a full appraisal of the facts of their case.

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