Shared assests and bankruptcy

optomark

I my brother and sister have equal shares in my (deceased) parents house, although only my sister currently lives there. She is in financial difficulties and is thinking of going bankrupt. Would any creditors be able to force sale of the house to settle their debts even though my brother and I have no part in the debt or would it be better for her to sign the house over to us to protect it from the creditors?.

wherediditallgo

I don't know all the ins & outs of it, as I don't have property to consider. What I can tell you from my own bankruptcy is that the forms ask for a lot of detail about your assets. If she signs over her share in the property to you & your brother, she'll have to declare she's done that & she could be penalised for it. Others with more detail will be along in the morning, but disposal of assets is most definitely frowned upon so she really shouldn't go along that route if she intends to declare herself bankrupt.

Richard_S

optomark wrote: »

I my brother and sister have equal shares in my (deceased) parents house, although only my sister currently lives there. She is in financial difficulties and is thinking of going bankrupt. Would any creditors be able to force sale of the house to settle their debts even though my brother and I have no part in the debt or would it be better for her to sign the house over to us to protect it from the creditors?.

Hi optomark,

The O.R could ultimately force a sale of the house to realise your sister's Beneficial Interest although they would give you every opportunity to purchase it first. Signing the house over to you would almost definitely not work; all property transactions are recorded and they're easy enough for the O.R to access.

Something you could legitimately do is to purchase your sister's B.I in the house now. It would have to be done at "arms length" but if you employ the services of a surveyor you would be able to value the house at the lower end of expectations and shouldn't have any problems.

If you then charge your sister rent, again a legitimate move, that would make or cover any mortgage required to buy your sister's B.I. Anything involving property is best dealt with by a competent solicitor and I think you should do that as a matter of urgency.

Regards

Richard

BrandNewDay

I believe the OR would even be helpful with this...they'd rather get their money quickly from someone than slowly. Someone will probably be along with more info - or, try the debt board on the UK version of The Motley Fool. I know I've seen the issue of shared ownership of houses come up on there, before.
Be careful doing the transaction shortly before she goes bankrupt. The OR will scrutinize this and if s/he suspects that you did not pay a fair price, they'll still take it off her (you.) For that reason, waiting until the OR is involved to buy may actually make sense. In fact, the OR might take a lower offer than fair market, based on what would be recovered in a forced sale. I'm not 100% sure, though.

rog2

Hi Opto - I am currently going through the process of trying to purchase my BI, in the family home, back from my trustee.
I would STRONGLY advise against your sister selling her share of the house prior to bankruptcy, unless of course this would release enough capital to satisfy her creditors and, thereby, avoid the need for bankruptcy altogether. The OR would see this as a possible fraudulent move, unless all the proceeds of the sale were made available to the OR.
Assuming that your sister does go for bankruptcy, he, or a Trustee, would immediately declare a vested interest in your Beneficial Interest in the house. The OR/Trustee will normally write to her, and the other interested parties, giving her and you the option of making an offer to purchase her BI, based on market value. If you, or the other party, refuse to co-operate, the OR/Trustee CAN, but ONLY as a last resort (quoted from my letter) and within the law, take you through the courts to 'force' a sale. After any sale, forced or otherwise, the OR/Trustee would account to you, i.e. pay you your share of the proceeds, less charges.
I do not know if the fact that your sister is only one third shareholder of the house would make any difference, although I think not.
IF your sister is set on the course of bankruptcy, I would wait until you are offered the opportunity to purchase her BI, as the OR/Trustee is more likely to discuss a 'sensible' offer, which COULD be lower than market value.

Richard_S

rog2 wrote: »

Hi Opto - I am currently going through the process of trying to purchase my BI, in the family home, back from my trustee.
I would STRONGLY advise against your sister selling her share of the house prior to bankruptcy, unless of course this would release enough capital to satisfy her creditors and, thereby, avoid the need for bankruptcy altogether. The OR would see this as a possible fraudulent move, unless all the proceeds of the sale were made available to the OR.
Assuming that your sister does go for bankruptcy, he, or a Trustee, would immediately declare a vested interest in your Beneficial Interest in the house. The OR/Trustee will normally write to her, and the other interested parties, giving her and you the option of making an offer to purchase her BI, based on market value. If you, or the other party, refuse to co-operate, the OR/Trustee CAN, but ONLY as a last resort (quoted from my letter) and within the law, take you through the courts to 'force' a sale. After any sale, forced or otherwise, the OR/Trustee would account to you, i.e. pay you your share of the proceeds, less charges.
I do not know if the fact that your sister is only one third shareholder of the house would make any difference, although I think not.
IF your sister is set on the course of bankruptcy, I would wait until you are offered the opportunity to purchase her BI, as the OR/Trustee is more likely to discuss a 'sensible' offer, which COULD be lower than market value.

Hi Rog,

I'm not disagreeing with what you've posted; I just think with some forethought and appropriate legal advice, what is a bad situation can to some extent be turned around with the minimum of pain to all concerned.

The O.R/T won't have any problem with the disposal of the sister's B.I providing it was done at "arms length" and the valuation reflected a realistic market price. The sister could then use that capital to make a one off "full and final" payment offer to her creditors, or just fritter it away; either way it wouldn't affect the other two siblings.

If the sister does go the bankruptcy route it also means that she has an allowable expense in terms of the rent she's paying, and that rent to a greater or lesser extent will help the other two offset the inconvenience and aggravation of having to raise the money in the first place.

Buying the sister's B.I at this point is also going to result in a quicker resolution to the problem.

Regards

Rich

rog2

Richard_S wrote: »

Hi Rog,

I'm not disagreeing with what you've posted; I just think with some forethought and appropriate legal advice, what is a bad situation can to some extent be turned around with the minimum of pain to all concerned.

The O.R/T won't have any problem with the disposal of the sister's B.I providing it was done at "arms length" and the valuation reflected a realistic market price. The sister could then use that capital to make a one off "full and final" payment offer to her creditors, or just fritter it away; either way it wouldn't affect the other two siblings.

If the sister does go the bankruptcy route it also means that she has an allowable expense in terms of the rent she's paying, and that rent to a greater or lesser extent will help the other two offset the inconvenience and aggravation of having to raise the money in the first place.

Buying the sister's B.I at this point is also going to result in a quicker resolution to the problem.

Regards

Rich

I actually do agree with you, and have said that if the sale - pre-bankruptcy - were to yield sufficient funds to pay off creditors, or as you say, make a 'Full and Final' settlement, thereby avoiding bankruptcy altogether, then, in my honest opinion, that would be the ideal situation. The other siblings would not be affected, niether would their sister have to go through the hassle that both you and I have gone through.

The answer that I went on to give was purely in response to the direct question relating to the point, assuming the sister chooses the bankruptcy route, as to whether other creditors (through the OR/Trustee could force through the sale of the house.

In this eventuality, then it could be that the two siblings could negociate a better price for her BI, through the OR/Trustee.

The unknown factor here, Rich, is the amount of the sister's debt in relation to her Beneficial Interest.

optomark

Thanks for the posts so far, all very useful info. In answer to queries my sisters debts are around 35000 the house is worth around 150000.So the buy out option would be a possibility but we were hoping as my brother and I had the majority share the house would be save from the OR. Does the type of creditor affect things i.e. what the debt is owed for...........most of it relates to a unsecured loan from Northern Rock?