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By pete351
I was made bankrupt last October owing approx. £100,000 and as I understood it my debts would be cleared after 1 year but as I am part owner of my house the trustee handling my bankruptcy is saying that I will have to sell my share of the house to pay theses debts. Therefore I am confused as it seems that the debts are not in fact written off.

I have lived in the house with my sister all our lives and we are both over 70 years of age. We have no savings to draw on and no other means of raising the amount and would be made homeless if this were to happen.

The house is jointly owned by me, my sister, an equity release company and a company that took a charge on the property.

I currently suffer from mental health issues and my doctor has written to the trustee stating that I already have a ‘poor quality of life’ and a forced sale of the house would have a serious detrimental effect on my health but the trustee does not accept that these are sufficient circumstances to stop the sale.

We are in a desperate position and are hoping you will be able to advise us as to our best course of action.
Thank you
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By James Falla
Hi pete351

Unfortunately it sounds as though you did not get the correct advice before you went bankrupt. If you are a part owner in a property then your share of the equity will have to be realised by the official receiver or Trustee for the benefit of your creditors.

If you or a third party are unable to raise funds to make an offer to the Trustee to buy back your share of the equity then their hands are tied. The rules require them to go to court to ask a Judge to grant an Order to sell the house.

The only positive thing here is that the Trustee is not allowed to simply sell the house. They first have to apply to the Court and there has to be a hearing where a Judge will look closely at the case. Where there are mitigating circumstances such as your age and health they might agree to suspend any sale Order for 3 years. However based on past Court cases of a similar nature it is unlikely that they will not eventually grant the Order unless your case is extreme in nature or the amount of equity is minimual and it would not make financial sense.

How much equity is currently in your property? Can you give figures for the estimated value of the property and what is the value of the charge taken by the equity release company?
By pete351
In answer to your question, the value of the house is approx, £350,000
The equity release was taken out in both my sisters and my names for £63,000 and the amount now owed is approx. £110,000
I forgot to mention it before but I am paying £100 per month to the trustees which they say will carry on for another 3 years after the bankruptcy finishes.

Any further advice you can give would be very welcome.
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By James Falla
Hi pete351

Appologies for the delay in responding you to. From what you have said the current equity in your property is £240,000 (£350,000 less the £110,000 owed to the equity release company).

Given you and your sister own the property in joint names this equity would be split between you 50/50 if the house were to be sold. In other words your share would be £120,000.

I am sorry to have to confirm to you that the rules of bankruptcy are clear in this situation. Your Trustee must take action to realise your share of the equity (£120,000) to pay your debts. Clearly you have no other way to raise this kind of money so I am afraid that the Trustee's hands are tied. They are going to have to go to Court to ask a judge whether or not the house should be sold.

Unfortunately there is no other option here. The law is the law. The judge may be able to help by allowing you more time. In similar cases I have seen judges give up to 2 extra years. However I think the chances of them ruling the house cannot be sold are slim I am afraid.

That said given your specific situation the judge may take a different view. However I expect they will also take into account that after any sale of your property your sister will retian her share of the equity (£120k) which can then be used to gain reasonable alternative rented accommodation.