Rented Property and Bankruptcy
- 27 Oct 2021
If you live in a rented property there is nothing to stop you going bankrupt. However you may be worried about how your home will be affected.
Included in this article:
- How is your rented property affected if you go bankrupt?
- Will your Landlord be told?
- Can you move to a new rented property after going bankrupt?
- How can you move if you have a poor Credit Rating?
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How is your Rented Property affected if you go Bankrupt?
Going bankrupt can be a good way of dealing with your debts if you are renting your home. This is because your rented property is not treated as one of your assets.
There is no risk to the property itself because it is not yours. As such it is not involved in your bankruptcy in any way.
You may be worried that the negative affect on your credit rating could somehow blacklist the property. This will not happen. Only your personal credit rating will be affected.
The property you live in and the people you live with are not blacklisted if you go bankrupt.
Will your Landlord be told if you go Bankrupt?
It is very unlikely that your landlord will be told about if you go bankrupt. Normally they will only find out if you have rent arrears. They would then be a creditor and the Official Receiver would have to speak to them.
Given this the only way they are likely to find out is if you tell them or they do a new credit check on you. However it is unlikely for this to happen even if you are planning on renewing your tenancy agreement.
If you are worried about your landlord discovering your bankruptcy you could tell them yourself. Their natural reaction will be to worry about the rent and the affect on their property. However you can reassure them that there will not be a problem with these things.
If you live in England, Wales or Scotland bankruptcy is not advertised in your local newspaper. If you live in Northern Ireland it is advertised in the Friday edition of the Belfast telegraph. As such in Northern Ireland your Landlord could find out.
Can you move to a different Rented Property while Bankrupt?
There may be a number of reasons why you need to move to a new rented property while you are bankrupt. Perhaps you have changed your job or you need a different sized home.
There is nothing to stop you moving. However you will need to consider how much rent you can afford to pay. It may not be possible to rent a more expensive property unless your income is also increasing.
If you are making a payment towards your debts the Official Receiver may agree to reduce this to compensate for an increase in rent. However they will only be likely to do so in exceptional circumstances.
Any deposit you paid when you first rented your property is one of your assets. In theory it has to be paid to the Official Receiver if and when you get it back. However if you move you are allowed to use it to pay for a new deposit.
How can you overcome a Rented Property credit check?
A major issue you will face if you want to move during or after your Bankruptcy is your Credit Rating. Before you can rent a new property most private landlords will carry out a credit check against you. You are likely to fail this.
There are really only two ways you can overcome the problem. The best is usually to offer that someone will act as a guarantor for your rent payments. Most landlords will be happy if a guarantor is provided.
Another option is to pay rent in advance. Generally speaking you would need to offer at least 6 months upfront. Clearly you may not be in a position to do this.
If you are moving to a Council or Housing Association property the fact that you have a poor credit rating should not be a problem. You will not normally need to pass a credit check before you can move in.
Hi,I was suspended from my job. I am behind with 4 months with the rent. I have some credit cards to pay.I am a foreigner in Northern Ireland. If I declare bankruptcy what will hapend with rent debts? Maybe I will be available to pay bankruptcy fee but I will not be available to pay anything other.
Hi Sorin
Rent arrears are included in Bankruptcy. This is the case whether you go bankrupt in England, Wales or Northern Ireland. As such if you go bankrupt these debts and your credit cards will all be included and written off.
What is your plan after you go Bankrupt? If you are living in private rented accommodation the landlord will probably not be too happy that his rent arrears will not be paid and may look to evict you. As such you will have to look for alternative accommodation.
Are planning to move back to you home country? If you go through the process in Northern Ireland you are not allowed to move abroad without the permission of the court until after you are discharged.
Hello. I am currently in an IVA but I am planning to cancel it and go bankrupt. However, I am also looking for a property to rent. I am wondering if it is better go to bankrupt before I find something or to go bankrupt when I’ve moved in. I’m just worrying about how this will affect my rental.
Hi Alex
The fact that you are currently in an IVA is recorded on your credit file and so your credit rating is probably already pretty poor. As such you may face issues renting a property whatever you do because you are likely to fail a letting agent credit check.
This situation will not be made any worse if you go bankrupt. Having said that I normally recommend that it is best to move into new rented accommodation first if you can and then go bankrupt.
If you are planning to use a letting agent you should be up front with them about the fact that your credit rating is poor. The normal way to overcome this is to find someone with a good credit rating who is willing to act as a guarantor. This is normally good enough for most landlords.
Hi, I am currently living with my Dad but am looking to move out and rent privately again. I went bankrupt in Feb of this year as I could no longer afford to pay my debt due to being on maternity leave and then having reduced income thereafter as my partner has had to give up work to be the primary carer for our daughter.
Due to the bankruptcy I am having great difficulty finding a letting agents that will even contemplate taking us on because of my bankruptcy. Is there anyway around it? I have a homeowner guarantor but obviously cannot afford to pay 6months rent in advance. I am open and honest to all the letting agents before I arrange any viewings but as soon as I tell them, they say they can’t help.
Any ideas or ways around this would be gratefully received. We need to find somewhere to live by the end of May or we will be homeless. Many thanks.
Hi Karen
Unfortunately there is no easy answer to this. The record of your bankruptcy will remain on your credit file for 6 years from the start date. As a result during this time it will be difficult to get a new rented property through a letting agent as you will normally fail their credit check.
Normally the only way round the problem is either to pay rent in advance OR to offer someone with a good credit rating who can act as a guarantor for the rent. That way if you do not pay it they would be liable. Most letting agents and landlords are happy with one or the other of these options.
You are doing the right thing being up front as most agents will do a credit check and discover your situation anyway so you don’t want to waste time by not telling them. Have you been clear that you can provide a guarantor who will pay the rent if you do not for some reason?