Bankruptcy assets

At the date of the bankruptcy order you will lose control of your assets. People commonly associate bankruptcy with losing all of your assets. This is not the case, the law allows you to keep certain assets. The following information is a basic overview only.

The following assets are exempt from the bankruptcy estate and you will usually be allowed to keep them:

• Vehicles, books, tools and other items of equipment which you need to use personally in your employment, business or vocation.
• Bedding, furniture, clothing, household equipment and other basic items that you and your family need in the home.

Even though the above assets are exempt from the bankruptcy estate by law, it is possible that the trustee can claim and sell them if their sale value is worth more than the cost of a reasonable replacement. The trustee then has a duty to use funds from the bankruptcy estate to replace those assets.

Assets held on trust for someone else are also excluded from the bankruptcy.

If the above is not clear then please seek advice. It is important that you fully understand how your assets will be affected before you go bankrupt.

Bankruptcy and your House

Your home is one asset in bankruptcy that the trustee may have to sell in order to get your share of the equity to help repay your creditors. Your share of the equity in the property is the amount that you will personally be entitled to receive from the sale proceeds.

For instance, this will usually be the amount after:

• The amount outstanding on the mortgage and secured loans is repaid
• The costs of the sale have been paid
• Your partner is paid their share of the sale proceeds if they have a beneficial interest.

It may be possible to put off the sale until one year after the appointment of the trustee so that you have time to make alternative housing arrangements. This is time you may be granted if you have a partner or children living with you.

If you do not wish to lose your home then you may be able to get someone to buy your interest. There may also be exceptional circumstances where the court will not order the sale of the property.

For more information about how the house is dealt with as a bankruptcy asset go to your home.

Bankruptcy and your Pension

If your bankruptcy petition was presented on or after 29th May 2000 and the Inland Revenue has approved the pension scheme then a Trustee cannot usually claim the pension as an asset in your bankruptcy.

For petitions presented before 29th May 2000 it is a different story. The Trustee may be able to claim some kinds of pensions.

To ascertain the treatment of your pension you should speak to a bankruptcy adviser.

Your income from any pension that you receive or become entitled to receive before your discharge may be included as income in determining any income payments agreement or income payments order.

Bankruptcy and your Life Assurance Policy

Any interest that you have in a life assurance policy is an asset that the trustee will generally claim. If you want to keep the policy in force it may be possible to for your interest to be transferred for an amount equivalent to the present value of that interest.

If the life assurance policy has been legally charged to another person such as for the purpose of security for the mortgage on your home the rights of the creditor will not be affected but your Trustee will control any additional value.

Bankruptcy and your Business Assets

If you are self employed the trustee will claim any business assets unless they are exempt.