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Is your parent’s property at risk if you go bankrupt?
If you are living in your parent’s property and you go bankrupt, you can rest assured that as long as you have no financial interest in it (i.e. your name is not on the deeds or the mortgage), their home will not be involved in any way.
The official Receiver can’t demand any money is released from the property to pay your debts, or make any other claims against it.
Your parent’s property will not be blacklisted. Once you are bankrupt, your personal credit rating will become poor, however your parents credit ratings will not. Properties are not blacklisted and their personal credit files will be unaffected. All utility or finance agreements they have will continue. They can apply for new credit in their own names if they wish.
Going bankrupt to deal with your debts might be an ideal solution if you are living at home. Your parent’s property is not at risk and you are likely to have little or nothing to lose.
Can you continue to pay rent to your parents?
When you go bankrupt, rent payments are a legitimate part of your living expenses. This is the case even if you are living in your parent’s property. You can and should include a reasonable amount in your budget to cover your rent. Basically treat yourself as if you were a lodger.
The maximum amount you can include is the equivalent to the what you would have to pay if you were renting a room somewhere else. As a guide this is normally between £80-£120/week depending on where you live in the UK.
Once you are bankrupt, you will no longer have to pay your debts. So if you have not have been paying any rent because you can’t afford it, this will give you an opportunity to start.
Paying rent to your parents is allowed if you go bankrupt. You should included an amount to cover it in your living expense budget in your application form.
What if you owe your parents money?
If you owe your parents money, you are unlikely to want to include this debt in your bankruptcy. You don’t have to list them as a creditor and they don’t have to be involved. However, you must understand that you will have to wait to repay them until after your bankruptcy has finished.
You are not allowed to included a specific budget in your living expenses to cover repaying money owed to any unsecured creditor. If you try to do so, the Official Receiver (OR) will disregard it.
The only way you can continue to pay your parents is if you can make savings from your legitimate living expenses budget. Where you are living in your parent’s property, you may agree with them that part of your rent payment can go towards repaying them what you owe.
Do not pay off money owed to your parents or other friends and family before going bankrupt. If you do it will be a preferential payment. The OR can demand that any such funds must be returned and they will be left out of pocket.
Living at home in your parent’s property and considering going bankrupt? Give us a call (0800 044 3194) or complete the form below for free no obligation advice.
I have been advising people on how to solve their debt problems for over 20 years. During this time I have helped many people go bankrupt. I am an FCA Approved Person and the Managing Director of Wilmott Turner Financial Services (owner and operator of Bankruptcy Expert