In two previous blogs (Part I & Part II) we have looked at the role of both the Official Assignee and the Bank in determining what happens to the family home in bankruptcy. Here we answer some common queries about the practicalities of what happens to the family home when bankruptcy is declared and the various protections in place that are designed to help keep families in the homes they have built their lives around.
What happens after bankruptcy?
On adjudication, the interest of the bankrupt in the family home is transferred to the Official Assignee. The ‘interest’ is interest in the equity of the home which is the difference in value between the amount of debt owed on the property and the market value of the property.
A vesting certificate is filed with the Property Registration Authority which registers the interest of the Official Assignee in the property.
Protections on your former interest in the Family Home
While this interest is now the property of the Official Assignee, there are some important restrictions on the Official Assignee’s power to deal with the property when it is a family home.
Firstly, Court approval has to be obtained by the Official Assignee before he sells this property. Secondly, if the spouse or civil partner of the bankrupt is not themselves declaring bankruptcy, then they may purchase the interest from the official assignee. If the property is in negative equity (and so the Official Assignee’s interest would be negative) usually a figure of €5,000 and legal costs is charged.
Another important protection is the automatic re-vestment of the interest back to the bankrupt party if the property cannot be sold by the Official Assignee within three years. We looked at that in more detail in our previous blog.
Protections in a Personal Insolvency Arrangement
\In certain circumstances, bankruptcy may not be the best option for a person dealing with debt and so a Personal Insolvency Arrangement (PIA) may be an alternative. This option will apply specifically to mortgage holders and those with secured and unsecured debts of €20,000 to €3 million.
Of particular interest to this discussion is the fact that a Personal Insolvency Practitioner is obliged by law to keep the person in debt in the family home unless the practitioner considers it is not practical (s.104 of the Personal Insolvency Act 2012).
The Act itself sets out considerations the practitioner should consider including a balancing of the cost of remaining in the family home versus the actual needs of the individual and their family.
Accordingly, it is unlikely that a 10 bedroom mansion with a swimming pool would be considered appropriate whereas a modest family home that costs similar to any alternative option has a much better chance of being protected.
To explore your options and For further information please contact John M. Lynch at [email protected] or Lynch Solicitors @ 052 6124344
This blog was the final of a three blog series. For more information on the Family Home in Bankruptcy please read:
- The Family Home and Bankruptcy Part I: The Role of the Official Assignee
- The Family Home and Bankruptcy Part II: The Role of the Bank