Buying ex out of house and 5 year bankruptcy clause

[NettlesAreEvil]

I have a spectacularly unpleasant ex, who persists in his emotional abuse despite our separation.
We have a child together, of whom I am the prime carer.
I have stayed in our jointly owned home, with our child.
Ex is now withholding maintenance as he wants his share of the equity out of our house and has threatened legal proceedings if I do not comply swiftly.
I do not have the full amount of equity to pay him. He was clearly hoping that I would be able to extract money from my parents on his behalf.
However, oddly, he has accepted my offer of what, very roughly, (house has not been valued yet), would equate to half of his equity in return for removing himself from the deeds, rather than selling the house.
My initial reaction was relief that my child would not have to be uprooted from his home, after everything else that he has been through. My next reaction was disbelief that my otherwise very unpleasant ex, would actually agree to doing something seemingly compassionate.

Now though, I have spent some time investigating his possible motives and have encountered the clause whereby, should my ex declare himself bankrupt at any time up to 5 years after being removed from the deeds, that I would be liable for his bankruptcy and would have to sell the house to give his further share of the equity / value to his creditors.
This way he would get at least some of his equity, from me.

Is there any way of protecting myself and our home from such an eventuality? Paperwork from the solicitors does include a declaration of solvency for him to sign, but is this not just a way of them removing any responsibility from themselves?

Thanks for your help

I'm not a lawyer, but could you insist on an insurance backed indemnity against bankruptcy perhaps?

How would he get it back though? It would be paid to his creditors? (Unless you mean he has the ability to pay off his debts with it as opposed to gets it himself in his pocket?)

You need to seek legal advice, BUT should this happen the creditors would be likely looking at a charge on the house, not forcing a sale or forcing you to find the cash. I know you don’t want a charge either, but just to reassure you. They are very unlikely to be able to force a sale for half the equity when the house is occupied by a family.

Sprinkles "How would he get it back though?"

I meant he would have the money I paid him towards his share of the equity.

Sprinklesinmyelbow the trustee in bankruptcy, so the insolvency service, DO force sales to recover some monies owed to creditors, and that is by no means unusual. They do not settle for charges. I don't think there is any way of protecting yourself, but providing you pay him market value they are unlikely to cause a problem. It is sales at undervalue that are the issue so unless you can pay approximately the market value this could be a problem . However, if you pay him half of his equity now, (so a quarter) were he to declare or be made bankrupt the trustees in bankruptcy would only come after his share, which, if this were to occur in a couple of years time, you might be in a position to buy the other quarter from the trustee in bankruptcy through savings or a further mortgage. That is if bankruptcy occurred at all. You would find the cost of insurance for this to be prohibitive. Hope this helps.

PM me if I totally confused you.

Thanks Jon66, that makes perfect sense and is as I understood it.
I cannot pay his share of the equity at market value and I am very unlikely to be able to at a later date.

Sorry crossed messages. It is not him who would get it back. When a bankruptcy order is made by the court, a trustee in bankruptcy is appointed. The trustee oversees the case. They look at whether there have been any assets given away or sold at an undervalue. If so, they have a duty to the court and creditors to realise those assets. In the case of a property, if there are other people who also own a share of the property, they are given the opportunity to purchase the remaining share. If the other owner cannot do this, the court via the trustee will make an order for sale and the property will then be sold once you have moved out of course. Your share of the money will come to you once the sale has gone through. That's it in a nutshell.

Were you married?

So, if I cannot pay him his full share of the equity, it would be better to sell the house, rather than giving him all my savings and then be at risk of losing the house in the future?

No, not married

I guess it depends on how much debt he has? It's a judgement you need to make. But, if you can afford to buy another house with the remainder of your share it sounds as though that would give you peace of mind, although you need to balance the expense of estate agents, solicitor and moving fees against staying with the possibility he might declare bankruptcy, but you having a better house. The rules re bankruptcy are available somewhere in the manual they use and it's very clear how they deal with that sort of situation, I'll have a look and post a link if I can find it. I wouldnt think he would declare bankruptcy just to get back at you surely? Bloody men . . .

Just to note that it is not very easy to get yourself removed from the deeds & mortgage. Are you 100% sure that your mortgage provider will take him off the deeds without you selling the house? You would have to be able to prove that you can take on the mortgage alone.

You should have nothing to worry about. Trustees in bankruptcy can go back 2 and sometimes 5 years to set aside transactions at an undervalue. You can delay his payout until your child finishes their education. As you'd be paying him now, you have leverage to reduce the payment, so you're paying him what it is worth.

Make sure it is well documented that you are using your right to defend his claim for an immediate sale as leverage to reduce what you're paying him.

A trustee can only go back more than 2 years (to 5 years) if he was insolvent at the time of, or as a consequence of, this transaction.

Yes please to the link if you have it Jon. Thanks for your help.

glowinglady - yes, I'm in the process of applying for a remortgage that would concurrently take him off the deeds.

www.insolvencydirect.bis.gov.uk/freedomofinformation/technical/technicalmanual/Ch25-36/Chapter31/part4A/Part 1/Part 1.htm

I was in your position some years back. The ex was in desperate need of money and also wanted to buy a house with his then partner. He accepted a very very low settlement for cash
I then held my breath for five years that he didnt go bankrupt ( which actually would have been a likely scenario)
Happy to say he didn't and I was, eventually, quids in