Will I lose my home if I go bankrupt?

Bankruptcy does not take your home automatically, but it does put your share of it into the hands of the trustee — the Official Receiver, or a licensed insolvency practitioner in more complex cases. Your equity forms part of the bankruptcy estate, and the trustee's job is to realise it for your creditors.

What happens to the property

• The mortgage is not written off. Secured debts survive bankruptcy: either you keep up the payments, or the lender's security stands and the property is sold.
• There is a year's grace where family live there. If your partner or children live in the home, the trustee must wait at least 12 months before applying for possession. After that the court will usually order a sale unless the circumstances are very exceptional.
• Minimal equity can save it. Where your share is worth very little — roughly under £1,000 — a sale is not worth pursuing. Your interest can also be bought out, commonly by a partner or a relative.
• The risk does not end at discharge. You are discharged automatically after 12 months, but the home can remain at risk for up to three years from the date of the bankruptcy order.

Weigh the alternatives first

You apply online to the Insolvency Service, the fee is £680 (payable in instalments beforehand, but never waived) and an adjudicator normally decides within 48 hours. Discharge after 12 months clears most debts, but not student loans, child maintenance arrears, court fines, or debts run up by fraud, and the bankruptcy sits on your credit file for six years. While undischarged you cannot act as a company director, and you must disclose your status to borrow more than £500. A Bankruptcy Restrictions Order or Undertaking can extend those restrictions for anything from two to fifteen years if you concealed assets, gave them away, or ran up debts you had no prospect of repaying.

If you own a home, look hard at the alternatives before applying. A debt relief order is not open to you, because you must not be the beneficial owner of a dwelling. An IVA can leave the property in place, though you will usually be asked to release equity in year four or five, or accept a longer term. Note too that a creditor owed at least £5,000 can petition to make you bankrupt whether you want it or not. Take free advice from StepChange (0800 138 1111) before you decide.