An all too often scenario sees a couple owning a house as joint tenants when bankruptcy confronts one of them.
The law is that a bankrupt’s share in the house vests with the trustee in bankruptcy. In basic terms the bankrupt’s share in the house no longer belongs to them it belongs to the trustee even if the trustee has not immediately taken steps to put themselves on the title. The joint tenancy is severed and the spouse and the trustee own the property as tenants in common.
The trustee will usually get the property valued and if there is sufficient equity will start the process of forcing the sale of their share of the property, even if that means forcing the spouse to join in the sale.
If there is little equity the trustee will usually reserve their rights to deal with the property at a later date. In this scenario, often the bankrupt and their spouse stay in occupation and their mortgage payments are set off against what the rent would have been.
Eventually, the trustee gets a fresh valuation, sees a healthy capital gain and then forces the sale years down the track. It is a real kick in the teeth when that happens.
If you are facing bankruptcy deal with the house as a priority, there are things that can be done.
Call me Bruce Pasetti 0431 128201 if you want to discuss.