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In a Bankruptcy, all of the property of the Bankrupt vests (passes to) the Trustee in Bankruptcy from the date of the Bankruptcy Order.
Under section 283A of the Insolvency Act 1986, the principal residence of the Bankrupt re-vests in them after three years (commencing with the date of the Bankruptcy Order) unless the Trustee takes certain steps.
These steps (to sell the property) must be taken within a three year period counting forward from the date of the Bankruptcy Order (unless the Trustee is not aware of the Bankrupt’s interest in a property; (ie it was not disclosed by them).
If the Trustee does not use the power to sell the Bankrupt’s property within that three year period, they will lose the ability to do so. The legal title of the property then reverts to the Bankrupt (who, by the end of this period, will usually be discharged).
This is the ‘use it or lose it’ choice placed before the Trustee.
As an alternative to obtaining an order for sale, an agreement may be reached whereby the Bankrupt’s spouse, partner, a relative or a friend buys from the Trustee the Bankrupt’s beneficial interest in the property.
Another option would be for the Trustee to agree to a charging order on the property; this would enable the Bankrupt and her family to continue to live at the property.
Any decision regarding the sale of the property ultimately rests with the Trustee (and any mortgagee of the property) and not with the Bankrupt. It is not unusual for a Trustee to opt for a charging order in circumstances where he is not able to dispose of the Bankrupt’s interest in the family home by the time he has completed the remainder of the administration of the estate.
[See ‘Bankruptcy’, ‘Bankrupt’, ‘Insolvency Act’, ‘Bankruptcy Order’, ‘Trustee in Bankruptcy’, ‘Legal Title’ and ‘Charging Order’.]
