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Filing for bankruptcy is not an easy decision and it should not be taken lightly. It is imperative that you know exactly what can happen to your home during the process, to make sure there are no nasty surprises along the way.

You may be required to sell your home if you have more than £1,000 equity on the property. As soon as you declare bankruptcy, the court has the power to administer all property of the estate. This would then be released from the sale of the house and distributed amongst your creditors.

If you have children or dependants living with you, often or not the court will give you more time to find alternative accommodation.

However, you may not necessarily have to sell the property to pay off your debts.

  • Share sale

An alternative is to sell a share of the house to a friend or relative and therefore the money from this sale can be used for creditors. It means that you can stay living in your home and you get back in the black.

If this sounds ideal, make sure you seek a solicitor for legal advice. Such transactions can turn nasty and affect relationships, so it is imperative to get a proper contract drawn up.

Bear in mind that if you have had to sell your home and move into rented accommodation during the process, you may be obligated to inform the landlord prior to moving in. Some tenancy agreements prohibit anyone who has been declared bankrupt to live in the rented housing.

  • Zero equity

If there is no equity in the home, there is no reason why it will be sold if you go bankrupt. What this means is that if the balance of your mortgage surpasses the value of your home, you have zero equity to use to pay unsecured creditors after the mortgage lender is paid.

However; your mortgage company might start repossession proceedings if you have not maintained the payments. If you want to keep your home, you MUST carry on making repayments during and after the bankruptcy.

Please note that properties in which the owner has been evicted due to repossession often sell for less, so the sale may not cover your debts and you may still owe money.

Before you declare bankruptcy, speak to a debt management company about all the other solutions that are available. It could be that you can wipe your debts clean and start afresh another way. Bankruptcy is not an easy way out and you could lose your home and all your assets.

Perhaps a debt management plan is a better alternative? The interest on your debts will be stopped, you get to keep your home and you can start to repay off your debts in a controlled way.

This article was provided by Ian Chase on behalf of, one of the leading total financial solution companies in the UK. If you are struggling to meet your monthly repayments or have fallen into arrears, visit the site today for expert help.

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