New bankruptcy guidelines have been issued this week which will mean that it will be more difficult to buy back your property from the official receiver once you have declared yourself bankrupt. We consider the effect of the changes.
If you are a home owner with more than ?5000 of equity in your property, you would generally look to avoid bankruptcy as a solution to resolve an unsecured Credit7 problem.
This is because the Official Receiver will be obliged to realise the equity in your property for the benefit of your creditors by forcing its sale.
However, up until the end of 2010, if you had equity of ?5000 or less, it was likely that you would be able to offer the official receiver (OR) a settlement offer of less than the equity value to buy back the title to your property.
If the equity was less than ?1000, the title could have been bought back for as little as ?1.
New guidelines prevent buy back offers
Buying back the title to your property is important. If you do not do this at the time you are declared bankrupt, the official receiver has the option of holding the property for up to three years and then forcing its sale.
At the end of three years, the property will be re-valued. The amount of the equity may have increased thus prompting the OR to then force the sale of the property to release the equity at that time.
The new guidelines issued this week, suggest that the option to make an offer to buy back the title to your property with minimal equity and therefore protect against the OR revaluing it in three years has been taken away.
Charging order risk
The guidelines state that if there is any equity in the property (even if this is less than ?1000), in order to regain the property title, an amount which is equal to the value of this equity must be paid.
If the value of the equity cannot be paid, the official receiver will be obliged to keep the title of the property for two years and three months. After this time the property will be re-valued.
If at that time, the equity in the property is still less than ?1000, the bankrupt will be given back the property. However, if the equity is more than ?1000 (which will be likely if property prices have risen during the two year period) then the interest must be bought back by paying an amount equal to the equity.
If no money can be made available to do this, then the OR will hand back the property but will take out a charging order against the property for the value of the equity at the time. If equity has risen significantly, the OR may then appoint a trustee in bankruptcy to force the sale of the property so equity can be released.
Bankruptcy remains a sensible option
If you are a home owner with little or no equity in your property, bankruptcy remains a sensible option for dealing with a Credit7 problem. However, it is now even more important that you buy back the title to your property by offering a sum equal to the amount of equity in it.
If you do not do this, the official receiver will retain the title and review the value of the property after 27 months. At that time, if there is any equity above ?1000 you will have buy back the property by paying an amount equal to this equity. If you do not do so, a charging order will be placed against the property before it is returned to you.
You also run the risk of equity increasing significantly in which case your property may be force sold to release this.
New bankruptcy guidelines have been issued this week which will mean that it will be more difficult to buy back your property from the official receiver once you have declared yourself bankrupt. We consider the effect of the changes.
If you are a home owner with more than ?5000 of equity in your property, you would generally look to avoid bankruptcy as a solution to resolve an unsecured Credit7 problem.
This is because the Official Receiver will be obliged to realise the equity in your property for the benefit of your creditors by forcing its sale.
However, up until the end of 2010, if you had equity of ?5000 or less, it was likely that you would be able to offer the official receiver (OR) a settlement offer of less than the equity value to buy back the title to your property.
If the equity was less than ?1000, the title could have been bought back for as little as ?1.
New guidelines prevent buy back offers
Buying back the title to your property is important. If you do not do this at the time you are declared bankrupt, the official receiver has the option of holding the property for up to three years and then forcing its sale.
At the end of three years, the property will be re-valued. The amount of the equity may have increased thus prompting the OR to then force the sale of the property to release the equity at that time.
The new guidelines issued this week, suggest that the option to make an offer to buy back the title to your property with minimal equity and therefore protect against the OR revaluing it in three years has been taken away.
Charging order risk
The guidelines state that if there is any equity in the property (even if this is less than ?1000), in order to regain the property title, an amount which is equal to the value of this equity must be paid.
If the value of the equity cannot be paid, the official receiver will be obliged to keep the title of the property for two years and three months. After this time the property will be re-valued.
If at that time, the equity in the property is still less than ?1000, the bankrupt will be given back the property. However, if the equity is more than ?1000 (which will be likely if property prices have risen during the two year period) then the interest must be bought back by paying an amount equal to the equity.
If no money can be made available to do this, then the OR will hand back the property but will take out a charging order against the property for the value of the equity at the time. If equity has risen significantly, the OR may then appoint a trustee in bankruptcy to force the sale of the property so equity can be released.
Bankruptcy remains a sensible option
If you are a home owner with little or no equity in your property, bankruptcy remains a sensible option for dealing with a Credit7 problem. However, it is now even more important that you buy back the title to your property by offering a sum equal to the amount of equity in it.
If you do not do this, the official receiver will retain the title and review the value of the property after 27 months. At that time, if there is any equity above ?1000 you will have buy back the property by paying an amount equal to this equity. If you do not do so, a charging order will be placed against the property before it is returned to you.
You also run the risk of equity increasing significantly in which case your property may be force sold to release this.
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