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ex potential bankruptcy and jointly owned home(8 Posts)
Hi - I am looking for advice about any way that I can protect my home that my ex is still named on as co-owner on the mortgage. He is currently being threatened with bankruptcy for a debt of about 6k. This has been dragging on for months and he is not dealing with it. He has other credit card debts which he is ignoring which he told me amount to around 14k. He had a personal payment plan which he stopped paying. In the summer one of his creditors applied to have a second charge placed on the mortgage for which the court case was in August. I assume this charge has been placed but have not received anything in writing. To prevent further charges being placed on the mortgage I saw a solicitor and had a declaration of trust made which my ex partner signed and which states all remaining equity in the house is mine as when we separated there was only 10k equity in the house. We separated 5 years ago and I have paid the mortgage and bills since this time. There is now approx. 50k equity in the property. The solicitor advised me that if he is made bankrupt nothing can protect the property as a sale will be forced to release 'his' 50% of the equity to pay his debts. I am a single parent on a low income and the mortgage lenders refused to put the mortgage in my sole name. I cannot afford any more solicitors fees. I am not eligible for legal aid with this issue. Debt advisory services cannot advise me because the debts are not mine. I cannot get any info from his creditors due to data protection. I work part time and my child has ASD. I currently get some tax credits and working tax credits. Is there anything I can do? I feel so powerless and it's as though I just have to wait until my ex partner allows everything I have struggled to keep go to waste. I have pleaded with him to sort this out and make arrangements to pay but to no avail. This situation is making me ill. Any advice gratefully received.
Your solicitor is right about bankruptcy, as it appears that he was insolvent at the time he made the trust declaration. If creditors on bankruptcy can show a court that the trust was declared with the intention of denying creditors there's no time limit for the setting aside of the trust, otherwise dispositions at an undervalue can be set aside going back 5 years.
You'd be better getting a clean break order within divorce (if you're married).
The trust must be registered at the land registry, and it will have no effect in relation to charges registered against his interest in the property prior to the trust.
It doesn't matter that the equity has increased - his 50% is still vulnerable however much it's worth. You would, though get credit for any mortgage capital you've repaid.
Check insurance policies - you don't want them paying the mortgage off directly. You want them paying out to you.
Thanks Collaborate. We were not married. Do you have any idea how they would divide the equity under these circumstances? Is there nothing I could do to prevent the property being sold though? I would be unable to get another mortgage independently on my income. I don't understand the bit about insurance policies - could you explain what you mean? Many thanks.
If your ex is made bankrupt you might be able to buy out your Ex's share if you could raise the money £25,000 on your current figures Could family help The trustee would probably take a lower figure as it would save him costs etc
I agree with Rangirl.
The bit about insurance is that if you have a joint policy, or are paying for separate policies, check who the beneficiaries are. You don't want it to be either him, or the mortgage lender. If the mortgage gets paid off then his share of the property has more equity. If it all gets paid to you then you can control it, and more crucially you own it. Speak to an IFA.
Thanks for this. I pay life insurance for both of us. I have kept up the payments since separation as I couldn't rely on him paying. I know it is for the amount of the mortgage (interest only so the original loan stays the same). I assumed this insurance paid off the mortgage so the beneficiary could own the house mortgage free but I will check this. Sadly there is no way I could raise 25k to buy him out. And the lender would still not give me the mortgage in my name as my income annually is a tenth of the mortgage.
I don't think it is quite as black and white as collaborate sets out. For example it is not clear that he was insolvent at the time the trust deed was made - the only time there will be a determination of insolvency is the point at which a bankruptcy order was made. Similarly it is at least arguable that the trust deed isn't a transaction which can be set aside but a document evidencing a change in beneficial ownership made at the time of seperation. I will explain.
If H goes bankrupt then everything he owns at the moment of bankruptcy automatically becomes the property of his trustee in bankruptcy. With jointly owned property if you dispute what the shares are, the trustee must apply to court for the court to declare how much of the equity in the property was H's (and is now the trustees) and how much belongs to you. This will almost certainly be combined with an application for an order for the trustee to gain possession and sell the property. That application can be made only between 1 year and three years after the bankruptcy order being made - so there is a window if time when they can make it. If there is equity in the property they will make the application if they can't persuade you to buy out his share.
The question for the court will be - how much equity did H have at the time of bankruptcy? The trustee will argue that it is 50% and the declaration of trust is an undervalue transaction as collaborate suggests. You might argue that although you bought the house originally intending it to be 50%, at the time you split up you both changed your intentions so that the equity would be all yours, as a way of obtaining some security for the children. The deed of trust was executed not to transfer beneficial entitlement (or equity) from you to him, but to document the change in equitable ownership that had been made on separation over 5 years before the bankruptcy (for collaborate - using jones v Kernott principles).
Whether or not your argument succeeds depends on (a) what happened around separation and whether that can be evidenced (b) how the trust deed is worded (c) whether there is additional evidence to corroborate this (perhaps from the solicitor who acted on the trust deed) (d) what the judge thinks about it all.
My main points are 1. This is a complex area of law and you certainly need legal advice. cAB will take you so far but you should perhaps start a fund to pay for some advice if possible 2. Nothing will happen instantly on bankruptcy - you will have at least a year after bankruptcy before an application can be made 3. You will be made a respondent to the application as a joint owner so will automatically be notified of it 4. The trustee will write to you beforehand offering to sell you the equity - there may be a deal to be done with him if you can get any financing from friends or family or if you can remortgage eg using a family member as guarantor in place of your H. It is worth entering discussions with the trustee at that point to see your options.
Transactions at an undervalue in the 3 years prior to bankruptcy can be set aside on bankruptcy. That changes to 5 years if the transaction made the bankrupt insolvent, or indefinite if the intention was to deny creditors.
It is a complex area of law, and OP would be better seeing a solicitor who is a licensed insolvency practitioner.
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