Insolvency Made Clear: A Guide for Debtors

Effect Of Bankruptcy
Box 5:
HOW MUCH OF THE HOUSE DOES THE
BANKRUPT OWN?
The starting point for a Trustee in Bankruptcy is that the Land Registry
should say who owns what percentage of a house: for example,
whether a husband and wife own the property 50:50, or if there is
some other division of interest. Unless the bankrupt and their family
can produce evidence to the contrary, this will be the end of the
analysis.
However, it is possible that the Land Registry, which only reports the
‘legal interest’, does not represent the beneficial interest. This would
happen when the legal owner holds part of the house on trust for
someone else. This could be through some express declaration of
trust; or when one party made a contribution to some or all of the
purchase price, or payments towards the mortgage or upkeep of the
house. The non-bankrupt partner should present a schedule of all the
payments they have made in relation to the house to claim as large a
proportion of the property as possible. They may need separate legal
advice to help them demonstrate what their true entitlement is. In
practice, a Trustee is likely to want to come to a settlement rather than
litigate.
2.3 Sale of the estate
Under s306 of the Act, the bankrupt’s estate vests in the Trustee automatically,
without any further formalities. This means that the Trustee can control the
balance in the bank account, and has the power to sell property belonging to
the bankrupt such as any valuable items like a television or car. If necessary, the
Trustee can issue a warrant authorising the seizure of property, to break open
premises, or to allow a police constable or officer of the court to search property
not belonging to the bankrupt, but which contains important documents (s365
of the Act).
The sale of assets is one of the most important aspects of bankruptcy. Other
than the exceptions discussed above, all property which the bankrupt owns is
transferred to the Trustee in Bankruptcy to sell. This means that the Trustee has
the right to physically remove property which the bankrupt otherwise has in
their possession. The Trustee may decide that certain items are not worth the
sales value. For example, they are unlikely to sell a collection of photo frames.
However, this decision is for the Trustee to make, and the bankrupt has no
direct say in the matter. Applications to challenge decisions of Trustees are set
out in Chapter 8.
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