An insolvency specialist believes fewer people could lose their homes if they sought legal advice before their debt problems spiral out of control and lead to bankruptcy.
Kathryn Maclennan, a specialist insolvency solicitor at Stephensons Solicitors LLP, believes that early advice could in fact save many people from losing their properties even if they are declared bankrupt.
Personal insolvencies are actually falling across most regions but that does not mean that people’s finances are getting better. Recent research by the Association of Business Recovery Professionals (R3) has found that debt worries remain high, with 50% of British adults surveyed, concerned about their current level of debt.
Kathryn said: “The sale of a family home as a result of a bankruptcy order does happen but ordinarily this is a last resort for all concerned, including the Trustee. If professional advice is sought it is possible to avoid this outcome and to put forward alternative proposals to a Trustee so that their interest is realised without the need for a sale.
“For most people, their family home is their biggest asset and the one which they fear losing the most so it is imperative that the bankrupt and any none bankrupt co-owner (normally the spouse) take advice to ensure they understand the implications of bankruptcy on the family home and the possible alternatives to a forced sale.
“When a bankruptcy order is made and a Trustee in Bankruptcy appointed, the assets of the bankrupt vest in the Trustee automatically and this includes the bankrupt’s interest in the family home.”
Ordinarily there will be a 12-month grace period following the making of the bankruptcy order before the Trustee would look to take court proceedings to secure an order for possession and/or sale of the property. During this period other factors can be taken into consideration by the Court but following expiry of the 12 months the needs of the creditors take priority. Despite the fact that proceedings are unlikely in this initial period, the bankrupt and the spouse can still negotiate with the Trustee from the outset in respect of the property and the best way to realise the value of the Trustee’s interest in the asset.
The starting point for any Trustee is what he/she is likely to receive if the property were sold. The Trustee stands in the shoes of the bankrupt so if the property is owned jointly with the spouse the Trustee would look to realise the property and take 50% of the net proceeds of sale for the benefit of the estate. If the property is in the sole name of the bankrupt then the Trustee will assume that he/she is entitled to the entire net proceeds of sale without having to account to the spouse for any of those funds.”
Kathryn adds: “This is an area where advice from a specialise bankruptcy solicitor can be invaluable. It is possible to successfully argue that the spouse does have an interest in the property, and therefore the sale proceeds, despite the fact that the property title may be in the sole name of the bankrupt.
There are also other issues which can be brought to bear when trying to ascertain the true value of a Trustee’s interest in a property. These include charges on the property which may have been for the sole benefit of the bankrupt, financial contributions to the property, any exceptional circumstances which could defeat an application for possession and sale of the home or delay enforcement of any order. Again these can be complex areas of law where specialise advice is recommended.
For more information contact Kathryn Maclennan via email on kmn@stephensons.co.uk or call 01616 966 229.
ENDS
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Media information: Lianne Tracey
Stephensons Solicitors LLP
Tel: 01616 966 229
Email: lct@stephensons.co.uk