While declaring bankruptcy gives you a fresh start, you may have reservations about moving from your home. Your co-owner may not want to sell, there may be schooling or friendship issues for your kids and there may also be issues with pets.
If you want to remain living in your home, it’s vital you understand each of the various options involved, and the associated risks.
The bottom line is, if you are to stay, someone has to buy out your bankrupt estate’s share in the property. Who is the buyer and what are their personal circumstances?
Here are some of the things you need to think about before deciding if it is right for you to try to stay in your home.
Financial strength of the purchaser
When you start talking to the co-owner or trusted family member or friend about them buying the interest the bankrupt estate holds in your property, it is important to be sure they are financially secure and unlikely to file for bankruptcy in the future. Otherwise, if they do, your home may go into their bankruptcy and your efforts to remain living there will be lost.
Likewise, if the buyer becomes subject to debt collection proceedings, your home could get caught up which could result in you no longer being able to live there.
Change of attitude by the purchaser
You need to be able to trust the purchaser. If the current co-owner is buying the bankruptcy estate’s share, but is not your life partner, you are relying on them to allow you to continue living in the property. If the house increases in value and the buyer decides to sell to access those capital gains, you will have to leave.
Death or divorce of purchaser
If the purchaser dies, then your property may be dealt with according to their will, which is another reason why you may no longer be able to stay in your home. Likewise, if the purchaser is not your partner and becomes involved in divorce proceedings, your home may become part of those proceedings. The end result is you having to leave your home.
To address all these risks, we recommend that before you decide you want to try to remain in your home, you obtain legal advice on what can be done. You need to find out if it would be appropriate for you to ask the purchaser for a ‘Right of Occupation Agreement’, to allow you to remain in the property until a specified time. For example, when you die.
This type of agreement is conditional on you remaining at the property and would normally be subject to you maintaining the property and paying the mortgage, rates etc.
Once you are discharged from bankruptcy, you could consider talking to the purchaser to explore what you can do to regain your share of the property from them. In these situations, you always need to start proceedings by getting advice from your solicitor.