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Your home may be repossessed if you do not keep up repayments on your mortgage. Think carefully before securing other debts against your home. Borrowing over a longer term can mean paying back more in total.
When you’re made bankrupt, your interest in your home can pass to a trustee, who is responsible for dealing with your assets, including any equity in the property, for the benefit of your creditors. This doesn’t automatically mean losing your home straightaway, but it does change who has a legal say over what happens to your share of it.
Understanding how this works, including a time limit that can work in your favour, matters if you’re facing bankruptcy or trying to understand what happened in a past case.
Why does your home become part of the bankruptcy?
Bankruptcy deals with all your assets, not just unsecured debts. If you own your home, or a share of it, that ownership interest is treated as an asset that can be used to help repay what you owe, in the same way as savings or other valuable possessions might be. This is a significant difference from an IVA, where your home isn’t automatically drawn into the arrangement in the same way. Our guide on what happens to your home in an IVA explains that comparison in more depth.
This is often the single biggest concern people have when weighing up bankruptcy against other debt solutions, and it’s worth understanding clearly before deciding whether bankruptcy is the right route for your circumstances.
What can the trustee do with your interest in the home?
The trustee’s role is to realise value from your assets for your creditors. With a home, that can include negotiating a payment in exchange for releasing their interest, arranging a sale, or, in some cases, taking no action if there’s little or no equity to recover. Every case is different, and what a trustee decides depends heavily on the numbers involved and the specific circumstances.
Family members or the bankrupt person themselves sometimes arrange to buy back the trustee’s interest, where funds allow, rather than the property being sold on the open market. Whether this is realistic again depends on the equity involved and what can be raised.
| What can happen | |
|---|---|
| Your interest in the home | Can pass to the trustee on bankruptcy |
| If there’s meaningful equity | The trustee may pursue it, including a possible sale |
| If there’s little or no equity | The trustee may decide not to pursue it |
| After 3 years with no action (main home) | Can revert back to you (Insolvency Act 1986, s283A) |
The 3-year rule that can return your home to you
One of the more reassuring parts of the rules is that, for your main home, if the trustee hasn’t dealt with your interest within 3 years of the bankruptcy, it can revert back to you automatically under section 283A of the Insolvency Act 1986. This exists partly to stop cases dragging on indefinitely. There are exceptions and specific conditions attached to this rule, so if it’s relevant to your situation, it’s worth checking current guidance on gov.uk or speaking to your trustee or a debt adviser about exactly where your case stands.
What if you own your home jointly?
If your home is jointly owned, only the bankrupt person’s share is drawn into the bankruptcy. The other owner’s share isn’t affected by the bankruptcy itself, though because the property as a whole may need to be dealt with to release the bankrupt person’s share, the other owner’s situation can still be affected in practice, for example if a sale is pursued. Our page on remortgaging where a partner was bankrupt looks at this from the other owner’s side.
Can you stay in your home during bankruptcy?
Many people continue living in their home for some or all of the bankruptcy, particularly where a sale isn’t pursued immediately or at all. There’s no single answer that applies to every case, since it comes down to the trustee’s decisions, the equity involved, and your own circumstances. If you’re concerned about this, raising it directly with your trustee, or getting independent advice, is more reliable than assuming a particular outcome.
If a sale is eventually pursued, there is normally a process involved rather than an immediate requirement to leave, and support is often available to help plan next steps. Speaking to a free debt adviser alongside your trustee can help you understand realistic timings for your own case.
What this means if you want to remortgage after bankruptcy
Bankruptcy in England and Wales is usually automatically discharged after 12 months, but it stays on your credit file for 6 years from the bankruptcy date. Our guide on how long bankruptcy stays on your credit file explains that timeline in detail.
If your interest in your home reverted to you, or was never pursued, and you’ve since been discharged, our page on remortgaging after discharged bankruptcy explains what specialist lenders typically want to see. If you’re still undischarged, our page on remortgaging with undischarged bankruptcy covers the more limited options usually available at that stage, and our remortgage after bankruptcy hub covers the wider picture, including rebuilding your credit file over time.
Where to get help
If you’re facing bankruptcy, or trying to understand what’s happening to your home in an existing case, speaking to your trustee is a good starting point for the specifics. For free, impartial advice about bankruptcy and the alternatives, contact MoneyHelper, StepChange or National Debtline before making any decisions.
Frequently asked questions
Will I definitely lose my home if I'm made bankrupt?
Not necessarily. Your interest in the home passes to a trustee, but what happens next depends on factors including how much equity there is, who else lives there, and whether the trustee decides to deal with the property at all within the usual timeframe.
What is the 3-year rule about the family home?
Under the Insolvency Act 1986 (section 283A), if the trustee hasn't taken steps to deal with your interest in your main home within 3 years of the bankruptcy, it can revert back to you automatically. Rules and exceptions apply, so check current guidance on gov.uk or with an adviser.
Does bankruptcy affect a jointly owned home?
Yes, but only the bankrupt person's share is affected by the bankruptcy. The other joint owner's share is not part of it, though the trustee's involvement in the property as a whole can still affect what happens, including whether a sale is pursued.
Can you stay living in your home during bankruptcy?
Often yes, at least initially, particularly if a sale isn't pursued straightaway. There's no fixed answer, since it depends on the trustee's decisions and the specifics of the case. Speaking to your trustee or a free debt adviser about your situation is the best way to understand what to expect.