Bankruptcy Study 4 - Equity in bankrupt's property - Saving the matrimonial home

Propose an Individual Voluntary Arrangement ("IVA")?

 

The following case study shows what needs to be done to determine the interest of a bankrupt (or soon to be bankrupt) in the equity in his home and what money needs to be paid over to the Official Receiver post bankruptcy in order to stay in the house.

 

Background

John and Norma are married. Their home, which is owned jointly, is valued at £200,000. The mortgage is £120,000 and that mortgage is supported by an endowment policy with a present surrender value of £50,000.

Norma has only recently told John that she has been shopping at the Chanel boutique on a weekly basis for the last year. Norma owes £160,000 on sixteen different credit cards.

 

Question

If Norma applies for bankruptcy (or an IVA) how much will have to be raised to enable the entire equitable interest in the matrimonial home to be transferred into John's sole name?

 

Answer

You now know from the previous case studies the sum to be found is based on the value of Norma's half interest in the equity which is calculated as follows:

  £ £
Value of Home   200,000
Less: Mortgage 120,000  
Less: Value of Life Policy   50,000  
Net Mortgage     70,000
Equity of John and Norma   130,000
     
Norma's Half Interest in the Equity     65,000

 

Comment

The property can be transferred into John's name after £65,000 has been raised to buy out Norma's interest. Norma's entire liability on the £160,000 of credit cards would then be written off - Most likely by way of an IVA (Individual Voluntary Arrangement)

 

For bankruptcy property advice specific to your circumstances please send your query by email to me, Chris Parkman, and I will be happy to provide FREE telephone or email advice.