Will I lose my house because of the business going insolvent?

Ordinarily, the key issue for a sole trader business proprietor is whether in the event of the business becoming informally insolvent they lose their house. When a trustee of a bankruptcy estate is appointed, his/her first duty is to evaluate what assets the bankrupt individual has, and more often than not the principle asset to be realised for the benefit of creditors is an interest in a property.

The Trustee will assess the property value, less the mortgage and potentially any 50% interest in the property due to your partner. Subject to what the value of the interest is, a trustee will take steps to realise the interest. However, a spouse does have rights of occupation for at least a 12 month period in order to protect their family before the trustee is likely to succeed with any application to court for possession and sale of the property.

There are three options available to a trustee:

1- Try to work with the family to account for the value of the trustee’s interest either from family and friends or potentially via a re-mortgage from the spouse.

2- The second option is a voluntary sale if a sale is the only way forward for the family to move on.

3- The final option is an application to the court for possession and sale of the property which can be costly for both the trustee and the family members who wish the bankrupt to retain an interest in the property. The best means to move things forward is to work with a trustee in bankruptcy and co-operate at all times in trying to realise the interest in the property for the benefit of the creditors.

If there is a threat from a creditor of a petition for bankruptcy, seeking the advice of a licenced insolvency practitioner can result in the submission of proposals to the creditor as an alternative to bankruptcy or at least an amicable settlement with the trustee of any bankruptcy regarding an individual’s interest in their matrimonial home.