What belongings are taken when you go bankrupt?

Written by on December 8, 2012. Posted in Bankruptcy Information.

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What belongings are taken when you go bankrupt? In short, from the date that the courts grant a bankruptcy order, all of your bank accounts, building society accounts and all moneys therein, pass to the control of the Official Receiver (they are “vested” in them), likewise your “assets”. As a whole, this is what is termed your “Bankruptcy Estate.”

The Official Receiver (or “Trustee”) will then try to use your Bankruptcy Estate to pay debts off on your behalf. Any costs of the bankruptcy, such as administration fees, are also taken from this estate.

So, then, what items get taken– or, in other words, what are deemed as your “assets”?

YOUR CAR:

The exception to this would be if the vehicle(s) in question was needed for use personally – such as in cases of disability, say – or for use in your employment, your business, or your vocation.

HOUSE:

This is a slightly more complicated affair. However, if you are the sole owner of your home then the Official Receiver will have the legal title and beneficial interest automatically passed over and placed into the Bankruptcy Estate.

If you have joint ownership of your home, or if your spouse/civil partner or children are living with you, then the sale of your property, by the Official Receiver, may be delayed until after the first year of bankruptcy. Instead, the courts could still order you to sell-off your home. The Official Receiver would then inherit your beneficial interest.

During any period that the Official Receiver/trustee may not sell your home, they can apply for a “Charging Order” on your interest in the property (only if that amount is worth £1,000 or greater). This means if you were then to sell your property, you must pay that amount to the Official Receiver, out of the revenue raised.

Additionally, until your interest in your house is sold, or the Official Receiver obtains a charging order over it, the interest is, technically, kept under the control of the Official Receiver. However, this is usually only for a period of three years and after that time the interest normally returns to you. But, should you be discharged from bankruptcy during that three-year period, the benefit of any increase in value of your interest would still revert back to the Official Receiver.

LUXURY ITEMS:

Any other properties, shares or non-essentials, such as antiques.

In addition to the above assets being taken from your possession and placed into the Bankruptcy Estate, all of your accounts will also be frozen. This means all credit cards, chequebooks, and bank-cards will be taken.

However, the Official Receiver can release certain monies in order for you to buy things if you need them urgently – things such as food. They can also release your spouse’s/civil partner’s share of any money held in a joint account.

So what can you keep? Well, ordinarily you will be permitted to keep any household items, like bedding, clothing or furniture as well as any items crucial to your job – tools, books or vehicles. But if anything could be replaced with a cheaper version, then you would have to give these over to the Bankruptcy Estate.