Will I lose my home if I go bankrupt?

What is bankruptcy?

Bankruptcy is a process whereby you declare that you are unable to pay your debts. You are removed from managing your own finances, and a trustee is appointed to manage your money and assets. When in this situation, one of the most common questions asked is, “will I lose my home if I go bankrupt?” For many individuals, bankruptcy does not always mean you will lose your family home; there are a few variables to be considered.

What does bankruptcy mean?

Claiming bankruptcy is serious matter and will result in a permanent record with the National Personal Insolvency Index (NPII). This information can be accessed by anyone. Once you have declared bankruptcy, a trustee is then appointed to:

  • Sell your assets
  • Recover any income you earn over a certain amount
  • Investigate your financial affairs, including anything you have transferred to someone prior to bankruptcy.

Bankruptcy will usually affect you for about 3 years, but this time-frame can also be extended. Beyond these high-level steps of declaring bankruptcy, it can affect you a bit more personally, including:

  • You can lose your personal items including TV, computers, jewelry, artwork and furniture
  • It will affect you applying for future loans
  • You may lose your house and car
  • Any inheritance, winnings and tax refunds will be taken to pay your debts
  • You will lose any money in your bank account in excess of $1,000

Under what circumstances will I lose my house?

Whether or not you retain you house depends on a number of variables such as:

  • if there is equity in the home
  • whether there are any debts over the home for example, a mortgage
  • whether the home has been purchased with protected money
  • who owns the home; and
  • who becomes bankrupt: the sole owner, one of the two co-owners or both co-owners

Some examples of different circumstances and possible outcomes:

  • House with a mortgage: your bank/lender can repossess and sell your house.
  • No equity in the house: your trustee or a secured creditor can still make a claim against your house, even if you owe more to the creditor than the house is worth.
  • Co-own a house: Your trustee becomes the owner of your share. The co-owner won’t be able to deal with the property without your trustee’s consent. If the co-owner is not bankrupt, they can submit an offer to your trustee to purchase the share you owned before you became bankrupt.
  • Your partner’s house: If you don’t hold a financial interest in the house, your trustee is not able to claim it. 


Are you concerned about losing your house in bankruptcy and need advice on how you can protect it? Contact one of our professional to discuss your options.

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