Bankruptcy and your Assets
At the date of the bankruptcy order you will lose control of your assets. People commonly associate bankruptcy and losing all of your assets. This is not the case and quite simply it is the Official Receiver who gets to decide what you do and do not keep. You will be unlikely to keep assets of any value.
Important: If you do have assets and are considering bankruptcy then you should seek bankruptcy advice. It may be possible to avoid bankruptcy if matters have not gone too far.
Those assets that the Official Receiver takes will be sold to first recover the costs of the bankruptcy proceedings and then repay the creditors.
There are some assets that you may be able to keep. For example:
- Vehicles, books, tools and other items of equipment which you need to use personally in your employment, business or vocation.
- Bedding, furniture, clothing, household equipment and other basic items that you and your family need in the home.
Note: Piggy's bankruptcy blog details what happened to his assets during bankruptcy and will give you an insight in relation to his circumstances only. To establish the likely treatment in relation to your assets you should seek advice.
Bankruptcy and your House
The Trustee may have to sell your home in order to realise your beneficial interest and help repay your creditors. Your beneficial interest in the property is the amount you will usually receive from the sale proceeds.
For instance, this will usually be the amount after:
- The amount outstanding on the mortgage is repaid
- Your partner is paid their half of the sale proceeds if it is a joint mortgage
It may be possible to put off the sale until the end of the first year after your bankruptcy so that you have time to make alternative housing arrangements. This is time you may be granted if you have a partner or children living with you.
If you do not wish to lose your home you may be able to get someone to buy your interest. There may also be exceptional circumstances where the court will not order the sale of the property.
If you are considering bankruptcy and you own a property then seeking bankruptcy advice will answer any questions and help you decide what is best for your circumstances. It may be that an IVA is a more suitable solution that will allow you to keep your house.
Bankruptcy and your Pension
If your bankruptcy petition was presented on or after 29th May 2000 and the Inland Revenue has approved the pension scheme then a Trustee cannot usually claim the pension as an asset in your bankruptcy.
For petitions presented before 29th May 2000 it is a different story. The Trustee may be able to claim some kinds of pensions.
To ascertain the treatment of your pension you should seek bankruptcy advice.
Your income from any pension that you receive or become entitled to receive before your discharge will be included as income in determining any income payments agreement or income payments order.
Bankruptcy and your Life Assurance Policy
Your interest in a life assurance policy is an asset that the Trustee will generally claim. If you want to keep the policy in force it may be possible to for your interest to be transferred for an amount equivalent to the present value of that interest.
If the life assurance policy has been legally charged to another person such as for the purpose of security for the mortgage on your home the rights of the creditor will not be affected but your Trustee will control any additional value.
Bankruptcy and your Business Assets
If you are self employed the trustee will claim any business assets unless they are exempt.
