More than seven years ago, I went bankrupt from a sole trader business. I owned a property that was at the time rented out due to the fact we had to live on the business premises.
We moved back into this property as soon as the business closed. At the time, the equity in the property was less than £10,000 and the Official Receiver (which manages the first stage of bankruptcy) said I could pay £5,000 to have the bankruptcy restriction (which means you can’t sell the property or claim any money from a sale) taken off the property deeds.
I didn’t do this on the back of advice that the restriction would automatically be lifted after seven years. This was has turned out to be wrong. As the property was not classed as my family home, the restriction remains on the title deeds.
However, over the years the equity in the property has significantly increased to £30,000. I have offered £3,000 plus costs to have the restriction removed, but this has been refused. I can't really afford much more and this is borrowing from family. What would be the minimum I can offer?
This is my family home and I now have two children. We would love to remortgage or sell.
The Official Receiver, or appointed trustee, only has three years to deal with the family home, but to meet this definition you, your spouse or a former spouse must be living in the property at the date of the bankruptcy order.
If you do not have this protection, the Official Receiver or trustee can sell the property at any point if this will be in the best interests of your creditors.
It has a legal obligation to sell assets for the best possible price for the benefit of creditors. For this reason, they will only accept your offer if you can convince them that it is approximately equal to, or greater than, the amount they could expect to recover from the forced sale of the property.
What you need to do is get an accurate value for your property so that you can calculate the amount of equity you have. The Insolvency Service Technical Manual recommends using the house price calculator offered by London & Country (https://www.landc.co.uk/calculators/house-price-calculator), but other free valuation tools are also available.
When you are calculating how much equity you own in the property, remember to factor in other people’s interest in the property, such as a spouse, as this could reduce the value of your share.
For more specific information and advice to help stabilise your finances, contact a free charity service such as National Debtline to speak with a trained adviser who can work through your situation in further detail.