Can I Keep My House if I File Bankruptcy

There are three scenarios in which you may be able to prevent your home from being sold. The legal framework protecting family homes means that trustees cannot automatically seize properties without following strict procedures. These are:

Scenario 1: Family Protection - Partners and Children Living With You

In this scenario, if your partner or children are living with you, the trustee (usually the official receiver) cannot usually apply to sell your home during the first year after the bankruptcy order is made. This legal protection is designed to give families time to arrange alternative accommodation or explore options to keep their home. After one year, the trustee may apply to sell the property, with the interests of creditors typically taking priority unless exceptional circumstances arise.

This is important for you to know, as this allows you to take control and find a way to rehouse yourselves. The official receiver has legal duties to consider the welfare of family members, particularly children, before taking action against the family home.

Scenario 2: Third-Party Purchase - Family and Friends Can Save Your Home

If a family member, friend, or co-owner can buy your share (the ‘beneficial interest’) of the property from the trustee (usually the official receiver), you can prevent your home from being sold on the open market. This process requires contacting the trustee to negotiate the purchase, typically at fair market value. Many people use this route and successfully remain in their homes, as trustees often prefer a straightforward sale to someone with a connection to the property.

Real-life case studies demonstrate that this approach can be highly effective - for instance, a couple managed to save their £200,000 home by raising just £10,000 to buy out the bankrupt partner's share.

Scenario 3: Low Equity Protection - Under £1,000 Beneficial Interest

If you’re facing bankruptcy in the UK and your share of the equity in your home (that’s your “beneficial interest”) is less than £1,000, the trustee can’t force a sale. Seriously. They’re not allowed to. Why? Because selling your home wouldn’t make sense, the costs would wipe out any tiny benefit for your creditors.

There’s a three-year clock ticking from the date of your bankruptcy order. If, after three years, your beneficial interest is still under £1,000 and the trustee hasn’t taken action, your home comes back to you. That’s right, ownership returns to you, and you could keep your home even after bankruptcy.

Bottom line: low equity means you’re protected under UK bankruptcy law. The law’s on your side here, and in many cases, it’s just not worth it for anyone to push for a sale.

Unfortunately, UK bankruptcy law doesn’t always protect your home. There are two key situations where you can’t prevent the sale of your property, even if you want to. It’s vital to understand these limits, especially as mortgage possession claims in England and Wales rose by 31% in Q1 2025 compared to the previous year. Here’s when you could lose your home:

Scenario 1: Sole Ownership with Significant Equity

If your share of the equity in your home (that’s what’s left after paying off your mortgage and any other secured loans) is £1,000 or more, the trustee can go ahead and sell your property under UK bankruptcy law.

How does it work? When your home is sold, your mortgage and any other secured debts are paid off first. Whatever is left after those debts, known as your “beneficial interest” or equity, goes to your bankruptcy estate to settle your other creditors.

Scenario 2: Joint Ownership with Substantial Combined Equity

If you jointly own a place and your share of the equity is £1,000 or more, the trustee can step in and look to sell your share to pay back creditors under UK bankruptcy law.

Let’s break it down:

Say you and your partner own a house in the UK worth £100,000, and there’s still £80,000 left on the mortgage. That leaves £20,000 equity. If you each own half, your share is £10,000. That £10,000 goes into your bankruptcy estate and could be used to pay off your debts, after fees and costs are taken out.

Current UK bankruptcy law gives you more protection than most people realise. The trustee can’t just swoop in and take your home; they must follow strict legal procedures. If you’re renting in England or Wales and keep up with your rent, bankruptcy alone won’t cost you your home.

With around 1 in 417 adults in England and Wales facing insolvency as of April 2025, knowing your rights is more important than ever. The official receiver must assess your situation, including any vulnerable people in your household, before taking any action regarding your home.

The Real Debt Guy is a qualified financial adviser and a UK debt expert. The information in this article is considered to be true and correct at the publication date.