Proecting the Family Home in Bankruptcy

We have a strong reputation in the bankruptcy and insolvency profession for assisting bankrupts and their families by defending claims brought by trustees and being committed to saving the family home.

Constructive Trusts and Resulting Trusts

We sometimes raise “constructive trust arguments” which basically means that a private agreement between a husband and wife as to the ownership of their home may be enforced against the Trustee in preventing the Trustee from selling the home.  A husband may hold the legal title of the property in his name or joint name with his wife but have transferred his “beneficial interest” to his wife before having been made bankrupt.   This may increase the wife’s “beneficial ownership” in the family home. The net result of such an arrangement may be that the Trustee acquires little or no interest in the family home and therefore is unable to sell. A transfer of an interest in property will however be subject to careful scrutiny as bankrupts often argue that they have transferred their interest in property.

A “resulting trust” on the other hand essentially allows a person whose name does not appear on the title deeds to argue that they have an interest in the property if they, for example contributed to the purchase price, having paid towards the deposit.

We work closely with bankrupts and their families in ensuring that certain criteria is met in being able to safeguard the family home. The Court may reverse a transfer of property made by the bankrupt, especially if the Trustee in Bankruptcy believes that the purpose of the transfer by the bankrupt was to place the property beyond the reach of the bankrupt’s creditors.

This is a specialist area of law.   The timing of certain transactions and the reasoning behind these transfers is to be carefully considered.

Equitable Exoneration

Equitable exoneration arguments may also apply to benefit the bankrupt and their family.

When a bankrupt has charged their share of the property to a lender, usually the co-owner wife is able to argue that this borrowing should not be deducted from her share of the sale proceeds. i.e that her share of the equity should be larger than that of her husband’s. The Court will however carefully consider whether the wife in such a situation has obtained a specific or overall benefit from any such of her husband’s business borrowings and if it is seen that she has so benefited, she may not be able to rely upon this principle to increase her share in the family home.

Equitable Accounting

We also give consideration to whether the non-bankrupt spouse or other family member may be able to diminish the Trustee’s interest in the family home by looking at any expenditure which has been incurred on the subject property in relation to maintaining, improving or renovating it.  We are able to successfully argue that this type of expenditure should reduce the Trustee’s interest in the family home by allowing the person having incurred this expenditure to have a corresponding interest in the property, so essentially he is allowed to be repaid the said expenditure. However, the Trustee will usually ask for evidence of this expenditure, in the form of invoices, receipt and bank statements showing that the expenditure had in fact been incurred by the non bankrupt.

Proprietary Estoppel

Proprietary estoppel arguments can also be successfully raised which allow a person to assert a beneficial interest property if they were made representations that they would have an interest in property and relied upon such representations.  If the representations, namely promises were not allowed to stand, they would suffer a loss and therefore, they would request the Court to allow these promises to take effect. So if A tells B that B has an interest in A’s property, and B in reliance upon this, spends money on doing up the property, then B should be able to enforce the promise against A’s Trustee.

The 3 year time limit to sell the family home

The law states that any Trustee in Bankruptcy only has 3 years to sell the family home from the date the bankruptcy order is made.  If the Trustee in Bankruptcy fails to take action by this date, he is prevented from selling the family home, however certain exceptions apply.

We advise on all threats against the family home posed by Trustees, lenders and creditors and have an unrivalled reputation for entering into successful negotiations, being leaders in this field of law.