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What Can Happen To My Home If I Go Bankrupt?

What Can Happen To My Home If I Go Bankrupt?
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Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

Almas Uddin04 Jul 2024

Facing bankruptcy brings a big worry: what happens to my home? Bankruptcy can lead to your house being sold to pay off debts, often within three years. Our article breaks down the steps and options you have to protect your place during this tough time and learn more about the correlation between bankruptcy and mortgage.

Understanding Bankruptcy's Impact on Home Ownership

Filing for bankruptcy affects your ability to keep your home. You might have to sell it or deal with legal claims against your property.

Timeline for Property Decision-Making Post-Bankruptcy

Going bankrupt affects many parts of your life, including what happens to your home. The Official Receiver plays a key role in deciding the future of your property after you declare bankruptcy.

  1. After filing for bankruptcy, the clock starts ticking for the Official Receiver. They have up to three years to make a crucial decision on whether or not your home should be sold.
  2. During this time, an important evaluation happens. The Official Receiver looks at the equity in your home - that's basically figuring out if what you could sell your home for is more than what you owe on your mortgage and any secured debts.
  3. If there's not enough equity or value in your home, they may decide not to sell it right away. This is good news for some people because it means they might get to stay in their homes longer.
  4. But things can change quickly if the value of your house goes up within those three years. The Official Receiver will keep an eye on this and might review their decision if it looks like selling could pay off more of what you owe.
  5. There's also a chance they'll put a charging order on your property during this period. This doesn't mean they'll definitely sell it, but it does mean they have a claim to some of the money if it gets sold later on.
  6. Please note that making regular payments towards your mortgage and any other loans secured against your house doesn't stop with bankruptcy. Keeping up with these payments can impact decisions related to retaining your property.

This timeline shows that keeping informed and actively managing finances even during bankruptcy is key. Each step involves legal and financial assessments that affect homeowners deeply, highlighting the importance of understanding how bankruptcy impacts one’s living situation and future financial stability.

Potential Outcomes: Property Sale or Charging Orders

Filing for bankruptcy affects homeowners in two major ways: selling the property or facing charging orders. Both outcomes hinge on the need to settle debts with creditors.

  1. Property Sale by the Official Receiver: After declaring bankruptcy, the person handling your case, known as the Official Guide, might decide to sell your home. This step is taken to release equity – which is the portion of your home you own outright – to pay back what you owe.
  2. Charging Orders as an Alternative: Instead of a direct sale, creditors may opt for a charging order on your property. This doesn't mean they can take your house right away. It places a claim on it, meaning if you sell the home in the future, some of the proceeds would go towards your debt.
  3. Buying Out Your Share: There’s a silver lining if you're facing bankruptcy but want to keep your home out of it. A partner, family member, or friend has the option to buy out your share of the equity before it's sold off. This way, you possibly avoid losing your home and offer some repayment to creditors.

The next point naturally transitions into how bankruptcy impacts home equity.

Exploring the Impact on Home Equity

When you file for bankruptcy, your home equity plays a big role in what happens next. Home equity is the difference between what your house is worth and how much you owe on it; this number can affect whether you keep or lose your property.

Defining Home Equity and Beneficial Interest

Home equity represents the portion of your home that you actually own, calculated by taking the current market value of your property and subtracting any mortgage or loan amounts you still owe.

For example, if your house is valued at $300,000 and you owe $200,000 on your mortgage, your home equity would be $100,000. This figure can increase as you pay down your mortgage debt or if the value of your home rises due to market changes.

Beneficial interest in a property means having a financial stake in it without being the legal owner on record. It refers to the extent of an individual's right to benefit from the property they’ve invested money into — for instance, through mortgage payments.

This concept is crucial for homeowners since it translates to how much of their hard-earned money has effectively paid off their living space.

Strategies to Avoid Home Sale

Going bankrupt does not always mean you have to lose your house. There are ways to keep your home safe from being sold off. Here are some strategies:

  1. Check if there’s no equity in the home. If the home isn’t worth more than you owe on it, selling it might not happen within the first three years after you have declared bankrupt.
  2. Talk to a bankruptcy attorney about reaffirming your mortgage. This agreement between you and the lender allows you to keep making payments and retain ownership of your home.
  3. Modify your loan terms with your specialist mortgage lender. Sometimes mortgage lenders will adjust interest rates, loan length, or principal owed to make payments more manageable.
  4. File for Chapter 13 bankruptcy instead of Chapter 7 if possible. Chapter 13 allows you to set up a repayment plan and possibly keep your property.
  5. Explore loss mitigation options like forbearance or modification before deciding on your previous bankruptcy. Lenders may offer temporary relief from payments or adjust loan conditions.
  6. Investigate government-backed programs to get a mortgage assistance that might be available to help afford mortgage repayments and avoid foreclosure.
  7. Consider strategic financial planning with professionals who understand bankruptcy implications on housing matters, such as certified credit counselors or a credit reference agency specializing in personal finance recovery post-bankruptcy.

Renting Considerations During Bankruptcy

Bankruptcy can make renting a house more challenging. Landlords might check your financial history, making it harder to get approval for a new place to live.

Renting Challenges for Bankrupt Individuals

Finding a new place to rent can be hard for people who have gone through bankruptcy. Landlords often check your credit reports before they agree to rent you a home. A bankruptcy record may make them worry about your ability to pay rent on time.

They might think of you as a high-risk tenant because your bad credit issues show that you've struggled with debts in the past, including issues like missed mortgage payments or credit card defaults.

To improve your chances of renting after bankruptcy, stay current with any payment plans and communicate openly with potential landlords. Show them proof that you're managing your finances well now, such as consistent income or a checking account in good standing.

Explain what led to the bankruptcy and outline the steps you've taken to ensure it doesn't happen again. Some landlords understand that everyone faces challenges and are willing to give tenants a chance if they see evidence of financial responsibility post-bankruptcy.

Handling Mortgage Payments After Bankruptcy

Keeping up with home loan payments after declaring insolvency is key. Even after clearing your debts, it's crucial to continue paying on time to keep your house. Reorganizing your spending can help manage these payments easier.

Want to learn how? Keep reading for effective strategies and advice on staying ahead.

Maintaining Regular Mortgage Payments

Keeping up with your monthly home loan payments is crucial, especially after declaring bankruptcy. While filing for bankruptcy can give you a fresh start by wiping out certain debts, it doesn't cancel out your mortgage.

This means you still owe the bank each month. Failing to pay on time could put your house at risk of foreclosure, where the mortgage brokers takes back your property.

To stay on track, consider tweaking your budget to prioritize your mortgage above other expenses. Since bad credit mortgages are not wiped clean in bankruptcy, making these payments should be top of mind.

You might also want to look into refinancing options down the line to lower those monthly amounts potentially. Staying current with payments helps maintain a positive relationship with your specialist lenders and contributes to rebuilding credit over time.

Reallocating Budget Post-Debt Relief

After bankruptcy, many find they have more money each month. This happens because they no longer pay on other debts. People can use this extra cash to make their home mortgage payments.

Making these payments on time is crucial for keeping your home after bankruptcy and improving your credit file as well as your credit rating in the credit report.

This new budgeting freedom also allows individuals to consider refinancing their mortgage with a new mortgage application. Mortgage after bankruptcy or refinancing could lower monthly payments or reduce the loan's interest rate. It's a good step to rebuild credit and secure financial stability post-bankruptcy.

Next, we'll explore how refinancing options vary between government-backed loans like FHA loans, VA loans, and conventional mortgages after bankruptcy discharge.


Facing bankruptcy can put your home's future in uncertain waters. The Official Receiver might decide to sell it, aiming to pay off debts with the equity you've built. If your home lacks equity, selling might not happen immediately, but the situation could change if its value increases.

Yet, staying on top of mortgage repayments gives you a fighting chance to keep your residence despite financial turmoil. Support from various organizations can also guide you through these challenging times, ensuring you're not going through this journey alone.


1. What happens to my house mortgage if I file for bankruptcy?

When you file for bankruptcy, an automatic stay halts debt collection including your house mortgage. However, the specialist mortgage brokers can still foreclose on your home if payments aren't made.

2. Can I keep my home after filing Chapter 7 bankruptcy?

Yes, but it depends on several factors like reaffirmation agreements and whether or not your equity is exempt under Chapter 7 rules. You may need to continue paying your first or second mortgage.

3. Will a bankruptcy affect my ability to refinance or get a new mortgage loan?

Bankruptcy can impact credit scores which might influence mortgage rates offered by lenders such as J.P Morgan or Rocket Companies Inc., making it harder to refinance or get a new loan.

4. How does Chapter 13 bankruptcies differ from Chapter 7 when it comes to homes?

Chapter 13 bankruptcies allow reorganization of debts and may let you catch up on missed payments over time without losing property unlike in chapter 7 where assets could be liquidated.

5. Can the bank take my home if I have filed for bankruptcy protection?

If you default on your mortgage payments, the mortgagor has rights to initiate foreclosure sale even during an ongoing bankruptcy case unless protected by federal housing authority rules.

6. Are there any other effects of going bankrupt on personal finance tools like credit cards and checking accounts?

Bankruptcy affects more than just mortgages; credit cards could be closed off, debit card usage limited and even student loans are usually not discharged through this process.

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FCA disclaimer

The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.

We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.