Disability and the Bankrupt’s home

When we meet an individual facing financial pressure, their home is very often their prized possession; the property they have worked all their life for and which they wish to hold onto at all costs.

Where there’s someone with an illness or a disability in the home, then that adds further pressure – another reason why it just can’t be put at risk.

Yet as we tell our clients, whilst it does not happen very often, the family home, like all your other personal assets is at risk in a bankruptcy situation, and can come under the hammer in bankruptcy.

But is my home “less at risk” if I am disabled or ill or if another family member living in the home has a disability or illness?

Under current insolvency legislation a Trustee in Bankruptcy has 3 years to deal with a bankrupt’s home, known as the “use it or lose it” rule.  If a Trustee does not take action to deal with his interest within 3 years from the date of bankruptcy, then this interest vests back to the bankrupt.

Where there is severe illness or disability with the bankrupt or a family member, then this can slow matters down.  It rarely means that a repossession is avoided altogether but it can be delayed for a considerable period; the Court may order that an order for repossession cannot be enforced for a certain period (e.g. if there is a terminal diagnosis until post death) or if a fellow resident has limited mobility but needs time to adjust / find alternative accommodation (a reasonable but not indefinite time extension may be granted).

The Court will take each case on its own merits.  The interest of creditors shall be balanced with the interest of the bankrupt / parties involved; and the judge will rule accordingly.

What this means in practice is that the bankrupt and their family may be in a stronger position to negotiate with a Trustee in Bankruptcy in such situations.  Akin to the bankrupt and their family, the trustee will unlikely wish to be sitting on a case for maybe 5 or 7 years or more – perhaps an offer to settle outside of Court proceedings may be the desired route for all concerned.

Contact aisling.muldoon@gildernewandco.com for further information