The Family Home (ISCIS)

The Family Home (ISCIS)

January 2011

Introduction 

1. The Enterprise Act 2002

The Enterprise Act 2002 (EA2002) amended the Insolvency Act 1986 by introducing a new section 283A, concerning the process for dealing with a bankrupt’s family home. These provisions are intended to provide a timescale within which the bankrupt’s interest in a family home may be realised by a trustee, thus striking a balance between the interests of creditors, the bankrupt and his or her family.

Although the personal insolvency law changes introduced by the EA2002 are applicable to cases made on petitions presented on or after 1 April 2004, for cases with an earlier petition date the EA 2002 contained ‘transitional provisions’ (see paragraph 23) to manage transition from the old to the new regime.

 

2. What is meant by ‘the family home’?

For the purposes of the EA2002, the family home is described as a property or a dwelling-house, and should be taken to include both freehold and leasehold titles. A ‘dwelling-house’ is further defined as any building or part of a building which is occupied as a dwelling and any yard, garden, garage or outhouse belonging to the dwelling-house and occupied with it, and which is considered to be the sole or principal residence of either:

a.  the bankrupt

b.  the bankrupt’s spouse

c.  the bankrupt’s former spouse

d.  the bankrupt’s civil partner (see Note c)

e.  the bankrupt’s former civil partner

at the date of the bankruptcy order.

It is possible that a bankrupt may have an interest in more than one dwelling-house under section 283A. A bankrupt could have an interest in several properties, including for example, one which he or she occupies, another occupied by an estranged spouse or estranged civil partner, or one occupied by a former spouse or former civil partner. If the official receiver as trustee failed to take any action in respect of any of those dwelling-houses, they would re-vest in the bankrupt at the end of the 3 year period, (for exceptions see part 8). The provisions of section 283A do not apply to partners or co-habitees, (see Note a).

The bankrupt’s interest in the dwelling-house vests in the trustee immediately on his or her appointment.   The value of a family home interest has no impact on the interest vesting (e.g. a ‘low value home’ will still vest in the trustee upon his or her appointment – see paragraph 19).

 

3. Timescale for dealing with a family home property

Section 283A applies to those cases where a bankruptcy order was made on a petition presented on or after 1 April 2004, where the bankrupt has an interest in a dwelling-house that may be either solely or jointly owned. Any dwelling-house to which this section applies must be the sole or principal residence of the bankrupt, the bankrupt’s spouse or former spouse, civil partner or former civil partner, at the date of the bankruptcy order. If that is the case, the trustee has a 3 year period to deal with the bankrupt’s interest in that property. If the trustee does not deal with the interest within 3 years of the date of the bankruptcy order it will automatically re-vest in the bankrupt. There are limited exceptions to this time period which are covered in paragraph 4.

On occasion, the bankrupt may have an interest in other residential properties which cannot be considered as his or her family home, and will not be subject to the provisions of section 283A. In such cases, the interest does not have to be realised within the 3 year timescale and will remain vested in the official receiver or insolvency practitioner (IP) trustee until they are dealt with by him or her. 

 

4. Exceptions to the three year period

a. Where a bankrupt has not disclosed his or her interest in a dwelling-house within the first 3 months from the date of the bankruptcy order, the 3 year timescale which the trustee has to deal with a bankrupt's interest, will begin with the date on which the official receiver or other trustee becomes aware of the property.

b. In exceptional circumstances, the trustee may apply to the court to extend the 3 year period. It is anticipated that such applications will be rare but may be appropriate in instances where, for example, the bankrupt discloses a property but withholds necessary information causing a delay in the procedure, or the bankrupt has vacated the property but despite the reasonable efforts of the trustee the sale is likely to be delayed beyond the 3 year period.  It may also be necessary to apply for an extension of the three year period where the bankrupt’s interest is in a charging order over a ‘family home’ and that interest cannot be realised within the three year period.

c. Where the official receiver or other trustee has sent notice to the bankrupt that he or she considers that the continued vesting of the dwelling-house in the bankrupt’s estate will be of no benefit to creditors, or that re-vesting will enable a more efficient administration of the bankrupt’s estate. 

 

5. Options for dealing with a family home property

In order to deal with bankrupt’s interest in a property that falls under section 283A, within 3 years the trustee may:

a. sell the bankrupt’s interest to a third party or back to the bankrupt but this course of action should only be taken where it is clearly in the interest of creditors to do so ( i.e. where it is anticipated that bankrupt’s interest is in excess of £1000). 

b. apply for an order of sale, although it is not anticipated the official receiver as trustee will make such application

c. apply for an order of possession, again, it is not anticipated that the official receiver as trustee will make such application

d. apply to the court for a charging order against the bankrupt’s interest in the property (not available where the value of his/her interest in the property is below £1,000), see Chapter 31.3, Part 8 and CHM part – Charging Orders under section 313 of the Insolvency Act 1986

e. reach a formal agreement with the bankrupt that he or she will incur a specified  liability to the estate in consideration of which the interest in the property will not form part of the bankruptcy estate.  However, it is not anticipated that the official receiver will enter into such agreements

f. if the official receiver is trustee, send notice to the bankrupt that he or she considers that the continued vesting of the property in the estate is of no benefit to creditors, or early re-vesting would facilitate a more efficient administration of the bankrupt’s estate. In this case the property will re-vest one month from the date of the notice

Charging orders will only be pursued as a last resort due to the costs involved in making such an application to the court and maintaining the case throughout the ‘life’ of the charge.

  

6. How to protect an interest in a family home

When the bankrupt is the sole registered owner of a property a bankruptcy restriction will be entered by HM Land Registry following notice of the bankruptcy (form LRRABO) being sent to the Land Charges Department.  This is covered in more detail, as is the procedure in the event that a bankruptcy restriction has not been registered, in the CHM part – Freehold Property: Solely owned - Registration of a Bankruptcy Restriction.

The Land Registry does not allow a bankruptcy restriction to be entered in the Register against the title of a property that is jointly owned. In cases where the bankrupt co-owns the property with another, see CHM part – Freehold Property: Jointly owned - Registering a Form J Restriction.

 

7. How should an interest in a family home be recorded on ISCIS

All properties should be entered in the ‘Assets’ tab on ISCIS.  Once the property has been entered on ISCIS the correct property type must be selected from the property type drop down menu.  It is important that any family home is identified as such on the property entry on the ISCIS ‘assets’ tab.

To add a secured creditor to a case you must use the assets tab.  Select the relevant property and select edit asset.  On the edit asset screen under property charge holders list there is an ‘Add’ button.  Select this button and follow the on screen instructions to add the details of the security. 

 

8. Notices required in respect of a family home

(Amended March 2011)

When a property has been identified as the sole or principal residence of the bankrupt, his or her spouse or former spouse, civil partner or former civil partner at the date of the bankruptcy order, the official receiver as trustee must send form BHNOT, ISCIS (‘Docs’ tab) – ‘Notice to interested parties of dwelling house - Form 6.83 ’ to each of those applicable, giving notice that the bankrupt's interest in the property forms part of the bankruptcy estate.  This should be done as soon as possible after the official receiver establishes that the dwelling-house is the sole or principal residence. Guidance Notes are attached to the notice explaining the consequences of section 283A.  The date that the BHNOT is sent should be entered on ISCIS (‘Assets’ tab) against the entry for the family home.  If the date box is not available then the date must be recorded against the asset entry as a note.

 

9. Disability as a consideration when dealing with the family home

Where there is evidence that the uncertainty experienced by an individual waiting to find out how a family home interest will be dealt with may exacerbate a disability (either directly or by association) the official receiver, as trustee, has the discretion to deal with that property interest before the review point (see paragraph 17).

In exceptional circumstances where the bankrupt has an interest in a property of less than £1,000 and a request is received to deal with a property interest on the grounds of a disability before the two year three month review the official receiver, as trustee, may transfer the interest for a nominal consideration.  Where a transfer of the interest in a property occurs the transferee will need to pay the official receiver’s legal costs.  This discretion must only be exercised on a case by case basis.  Similar provision should be considered for requests based upon caring responsibilities (including pregnancy/maternity) and age (65+) where the uncertainty could lead to mental health related concerns.

 

10. Valuation

The bankrupt's interest in a dwelling-house can be valued using a variety of methods including:

a. bankrupt's valuation

b. local knowledge

c. information from mortgagee

d. use of the internet (see paragraphs 10A-10E)

e. drive-by valuation

f. professional valuation, i.e. chartered surveyor

g. estate agent

The official receiver should decide which form of valuation is appropriate on a case by case basis. Where an offer for the bankrupt’s interest in a property is to be accepted the official receiver should ensure that there is a professional valuation of the dwelling-house, unless a recent independent valuation has been obtained and the official receiver is satisfied that it is accurate. 

 

10A Use of internet valuations

(Added December 2011)

To ascertain the value of a property through the use of internet valuations the official receiver should take care to avoid sites that over-value properties. Sites using the Nationwide house price calculator (www.nationwide.co.uk/hpi/calculator.htm) and Halifax house price index (http://www.lloydsbankinggroup.com/media1/economic_insight/house_price_tools_page.htm) are the preferred sites to use.

 

10B Average of two internet valuations to be used

(Added December 2011)

In most cases using the average of two internet valuations of a property, together with consideration of the official receiver’s local knowledge of the area in which the property is located and the insolvent’s valuation of the property, will be sufficient for the official receiver to reach a reliable valuation of a property.

The following website uses data from Halifax and Nationwide Building  Society to give an average value, based on the region in which the property is located www.lcplc.co.uk/calculators/house-price-calculator/

 

10C Information required for certain internet searches

(Added December 2011)

Halifax and Nationwide house price calculator sites require the following information in order to calculate a property’s value: 

  • Purchase price.
  • Year purchased.
  • Quarter purchased.
  • Region of UK property is located in.

 

10D Purchase price and year of purchase

(Added December 2011)

The purchase price and the date of purchase of a property are available for all house purchases made after 1 April 2000 as the information is recorded on the title register of the property at HM Land Registry.  The information can be obtained from most internet property valuation sites. The information can also be requested from the bankrupt or obtained from the response to the letter sent to mortgage lender seeking information about the mortgage.

 

10E Properties purchased pre 1 April 2000

(Added December 2011)

Where a property has been purchased prior to 1 April 2000, the purchase price of the property and the date it was purchased are not publically available information. The official receiver should therefore seek to obtain this information from the bankrupt or from the response to the letter sent to the mortgage lender (form MP2, ISCIS ‘Docs’ tab) seeking information about the mortgage.

 

10F Internet valuation – need to exercise judgment

(Added December 2011)

The official receiver will need to exercise judgment on whether or not to accept the average internet valuation in certain circumstances e.g. where it is known that the property has been significantly extended or improved since the date of purchase. In such circumstances consideration should be given to obtaining a drive-by valuation of the property with details of the known extension/improvements provided to the agent (see Chapter 31.3, Part 4).   

 

10G Difference in internet valuations of greater than 10%

(Added December 2011)

Where there is a difference of greater than 10% between the two internet valuations (prior to calculating the average) , the official receiver should obtain a third valuation, either from the internet or from a drive-by valuation (see paragraphs I). The average of the three valuations should then be used as the property valuation.

Where the internet valuations indicate that the insolvent’s interest in the property is greater than £10,000 and an insolvency practitioner is likely to be appointed, then no third internet valuation or drive-by valuation will be necessary.

 

10H Dispute over value of property

(Added December 2011)

Where there is a dispute over the value of the property, the insolvent should be asked to obtain his/her own valuation of the property. Any valuation obtained by the insolvent may be used as the third valuation for calculating the average referred to in paragraph 10B.

 

10I Drive-by valuation

(Added December 2011)

Drive-by valuations should not be used to routinely value property. Instead a property should be valued by taking the average of two internet valuations and by taking into consideration the official receiver’s local knowledge of an area and any valuation provided by the bankrupt  (see paragraph 10B).

The official receiver may consider obtaining a drive-by valuation where there is a difference of greater than 10% between the two internet valuations of a property and a charging order is under consideration. The drive-by valuation and the two internet valuations should then be used to calculate the average value and this figure used as the property valuation.

 

10J Drive-by valuations – Connells

(amended June 2012)

Where a drive-by valuation is considered necessary it may be obtained via Connells Estate Agents , who offer a fixed fee service for residential property of £65 plus VAT. To instruct Connells, the following form (drive-by valuation instruction) should be completed and emailed to TIS@connells.co.uk

Alternatively the official receiver may request local agents to carry out the drive-by valuation.

 

11. Form MP1 and the low cost Property Conveyancing Scheme

The low cost property conveyance scheme, which is available for jointly owned properties should only be pursued if there is likely to be a benefit to the creditors in doing so.  It is anticipated that there will be no benefit to the creditors in pursuing transfers where the bankrupt’s interest is less than £1000 (see paragraph 19).

Where a transfer of the bankrupt’s interest in a property comprising a family home would benefit the creditors the official receiver as trustee should send form MP1, (available on the ORBS intranet site) ‘ Letter  to the bankrupt, and/or co-owner of a property inviting an offer to purchase the bankrupt’s interest in that property (the family home) from the Official Receiver’ a template is available by clicking HERE

If the MP1 letter option selected relates to a jointly owned property, it will draw the bankrupt and co-owner’s attention to the Service’s low cost Property Conveyancing Scheme operated by TLT solicitors of Bristol for a fixed fee. See CHM part – Sale of Bankrupt’s Interest in jointly owned property. Use of the low cost Property Conveyancing Scheme should ensure that a bankrupt’s beneficial interest in a jointly owned property can be transferred, usually with the transfer of the legal title, out of the bankrupt’s name, without incurring excessive costs.

It would be for the official receiver to decide, once appropriate evidence has been received, whether to proceed with a transfer

With regard to the procedure for dealing with solely owned properties, see Case Help Manual (CHM) part – Sale of Bankrupt’s Interest in solely owned property.

If a request is received by a bankrupt prior to the two year three month review on the basis of a disability the guidance at paragraph 9 should be followed.

 

12. Offer received for interest in family home

(Amended May 2011)

If an offer is received for the bankrupt’s interest in a family home and it is anticipated that a sale of the interest would benefit the creditors, i.e. the bankrupt’s interest in the property is expected to be in excess of £1,000, form MP1 should be sent to the proposed purchaser (see paragraph 11).  A transfer of the interest should not be pursued where it is likely, from the outset, that a realisation would not exceed £1,000.

Where an unsolicited offer is received from the bankrupt or a third party where  the bankrupt’s interest is worth less than £1,000 the official receiver may still consider any offer if he/she deems that it is in the interests of creditors to accept (i.e. where the offer is in the region of £1000).

If a request is received by a bankrupt prior to the two year three month review on the basis of a disability the guidance at paragraph 9 should be followed.

 

13. Family home with equity

In cases of a property with equity where the realisation is likely to be protracted (usually, this will be where the official receiver is not aware of any willing purchaser for the property, the official receiver should seek the appointment of an IP as trustee either by a meeting of creditors, see CHM part – Meetings - Calling a meeting or an appointment by the Secretary of State, see CHM part – Insolvency Practitioners - Appointment by the Secretary of State.

For general guidance on matters to be considered see TM, Chapter 17, paragraph 17.3.

The appointment of a trustee may also be appropriate, where there are other assets of a complex nature in the case, or where there has been a request from creditors for the appointment of a trustee other than the official receiver see CHM part – Meetings - Requisitioned Meetings.

In cases that are 2 or more years old in which the principal potential asset is an interest in a dwelling-house, which at the date of the bankruptcy order was  the sole or principal residence of the bankrupt, his or her spouse or former spouse, civil partner or former civil partner, the official receiver can apply for a Secretary of State appointment of the next IP on the local office rota, without the need to refer back to creditors. This is conditional on the Report to Creditors including the following text: “The principal asset in this case is the dwelling house referred to above. At this stage it is envisaged that the bankrupt's interest may be realised without the need for possession proceedings, however if this is not possible action will be taken that may include the official receiver seeking the appointment as trustee of the next insolvency practitioner from his/her rota without further reference to creditors.” See TM, Chapter 17, paragraph 17.51.

 

14. Mortgaged dwelling-house where no surplus is expected

(Amended May 2011)

Generally, where the dwelling-house is subject to a mortgage and no surplus is expected, the mortgagee may be left to deal with the bankrupt's interest but should be requested to inform the official receiver as trustee, of any attempted dealings and account for any surplus.  The situation will be reassessed as part of the property review which will be carried out 2 years 3 months after the making of the bankruptcy order (or later if one of the exceptions in paragraph 4 apply). If an unsolicited offer is received from the bankrupt or a third party for the bankrupt’s interest in the property this may be accepted where the official receiver believes it is in the interests of creditors to accept (i.e. where the offer is in the region of £1000) the offer may be considered (see paragraph 12).

 

15. Transfer of cases to a Regional Trustee/Liquidator Unit (RTLU)

(Amended May 2011)

Where the bankrupt’s interest in the property is insufficient to attract an IP, (below £10,000 should be used as a guide figure but this may vary depending on local and general circumstances, the case should be transferred to the relevant RTLU.  The transfer of the case file is carried out through the ISCIS ‘Cases Header’ tab.  It will then be for the receiving RTLU to allocate roles on ISCIS (‘Roles’ tab) to ensure that any correspondence received is correctly routed.  Until the full implementation and rollout of ISCIS/ICM has occurred there will be hybrid cases where case information and documentation will be partly within Wisdom and partly within paper files.  It is important that for these files the paper component is sent to the appropriate RTLU promptly.

Where there is equity and a willing purchaser and, therefore, the realisation of the property is not likely to be protracted, such cases should also be transferred to the RTLU.

For further information see CHM part – Long Term Assets and the OROS document Protocol Governing the relationship between ORs and RTLUs

 

16. Early re-vesting before review

(Amended April 2013)

The official receiver will have the discretion to effect an early re-vesting of the property prior to the review back to the bankrupt in the following tightly constrained circumstances:  

  1. At the outset of the bankruptcy where the property is in negative equity and there are second or further charges such that the official receiver, as trustee, can determine that there is no reasonable prospect of a surplus becoming available from the property within the three year period.
  2. Properties in negative equity where there are no second or subsequent charges but where the official receiver, as trustee, determines there is no reasonable prospect of a surplus becoming available in the three year period.  It was formerly the case that the decision to carry out early re-vesting could only be made at director level.  That requirement has been discontinued and discretion may now be exercised by the official receiver, as trustee, but only on a case-by-case basis. 

17. Review stage- general

In most instances the review is likely to be undertaken by an RTLU, and will commence at 2 year 3 months after the making of the bankruptcy order, and  is applicable in all cases. 

Where the bankrupt’s interest exceeds £1,000 form MP7 should be sent to the bankrupt and any joint owner(s).  This letter outlines the low cost conveyancing scheme and invites any prospective purchasers to make a suitable offer.  Form MP7 also highlights what would happen if a willing purchaser is not found and explains the alternatives open to the trustee.

 

18. Review stage - Equity in excess of £1,000 and willing purchaser

Following the review, if the bankrupt’s interest in the property is expected to be in excess of £1,000 and a willing purchaser is identified the official receiver, as trustee, may consider selling the bankrupt’s interest (see paragraph 12). 

This route should only be pursued if the transfer is likely to be straightforward and non protracted.  If there are any complexities or difficulties in the case or in  progressing the transfer and there is sufficient equity consideration should be given to seeking a Secretary of State appointment of an IP. TM, Chapter 17, paragraph 17.3 provides general guidance on the matters to be considered when considering whether the appointment of an IP as trustee is appropriate. See also paragraph 10.

 

19. Review stage - Equity in excess of £1,000 and no willing purchaser

Following the review, if the bankrupt’s interest in the property is in excess of £1,000 and no willing purchaser is identified consideration should be given to seeking a Secretary of State appointment of an IP, TM, Chapter 17, paragraph 17.3 provides general guidance on the matters to be considered when considering whether the appointment of an IP as trustee is appropriate. See also paragraph 10.

If an IP is not willing to accept the case the official receiver should consider making an application for a charging order, (see paragraph 5).

 

20. Review stage - Low equity (below £1000)

At the time of the review it may transpire that the bankrupt’s interest in the family home is less than £1000.  If this is the case and the property interest remains to be dealt with, steps should be taken to re-vest the property interest in the bankrupt (provided none of the exceptions mentioned in paragraph 4 apply). This is because where an interest in a family home is less than £1000 it is considered to be a ‘low value home’ (see TM Chapter 31.3, Part 6).  The trustee should not make an application to court for an order of sale, possession or for a charge on a low value home, as such applications will be dismissed by the court. 

 

21. Early re-vesting following review

Where the official receiver decides that it is appropriate to re-vest the interest in a family home property early form BHREV, (ISCIS ‘Docs’ tab)’Letter to bankrupt advising of re-vesting, re-vesting in one month ‘ should be sent.  This will normally be done following the two year three month review the official receiver considers that the continued vesting of the property in the bankrupt's estate is of no benefit to creditors or that the re-vesting to the bankrupt will facilitate a more efficient administration of the bankrupt's estate.  

In such cases, the property would re-vest back in the bankrupt one month from the date stated on form BHREV.

 

22.  Re-vesting

(Amended March 2011)

Where the interest in the dwelling house re-vests in the bankrupt it will occur without the need for any conveyance, assignment or transfer. The official receiver must take one of the following actions dependent on whether or not the dwelling-house is on land registered at the Land Registry.

a. Registered land

When the bankrupt's interest in a property on registered land re-vests, the official receiver must make application to the Chief Land Registrar to amend the register(s) within 5 business days of the interest re-vesting (7 days for cases where the bankruptcy petition presented was before the 6 April 2010). The appropriate application to use would depend upon whether the property is jointly or solely owned. For a jointly owned property Land Registry form RX4 should be used to remove the Form J restriction. For a solely owned property Land Registry form RX3 should be used. Both form RX3 and RX4 are available from the HM Land Registry's website www.landregistry.gov.uk. Form BHCERT, ISCIS (‘Docs’ tab) – ‘ Bankrupt’s home - certificate of re-vesting‘ will need to accompany the application, whichever form is used.

The official receiver is also required to notify the bankrupt, his or her spouse or former spouse, civil partner or former civil partner (as applicable) that the application has been made. Such notification(s) will be made using form BHLET, ISCIS (‘Docs’ tab) – ‘ Letter to bankrupt advising of re-vesting ‘ (amended as required), and should be sent within 5 business days of the interest re-vesting. (7 days for cases where the bankruptcy petition was presented before 6 April 2010).

b. Unregistered land

When the bankrupt's interest in a property on unregistered land re-vests, the official receiver must send form BHLET enclosing a copy of Form BHCERT to the bankrupt, his or her spouse or former spouse, civil partner or former civil partner (as applicable) and others with an interest in the property, e.g. mortgagee or other charge-holder, informing them of the re-vesting. Such notification(s) should be sent within 5 business days of the interest re-vesting. (7 days for cases where the bankruptcy petition was presented before 6 April 2010).

   

23. Transitional provisions

Although the personal insolvency law changes introduced by the EA2002 took effect on 1 April 2004, the EA2002 also detailed ‘transitional provisions’ relating to the family home where an individual was adjudged bankrupt on a petition presented before 1 April 2004, and the bankrupt’s interest in the dwelling-house fell to be dealt with under section 283A. The transitional provisions period ended on 31 March 2007 and most dwelling-houses to which the provisions applied will now have been dealt with by the trustee, or have re-vested in the bankrupt.

There may be a small number of cases where there was late notification of the bankrupt’s interest in the property, or where the court has extended the 3 year period in which the interest in the property vests in the trustee. Should further information regarding the transitional provisions on the family home be required, see Chapter 31.3, paragraph 31.3.73  

Notes:

a For the purposes of EA2002 section 261(8), ’spouse’ should be interpreted as the bankrupt’s marital or former marital partner. This does not include an estranged partner or co-habitee even if there are children of the relationship living with or cared for by the estranged partner or co-habitee.

b Where a property re-vests back in the bankrupt and the official receiver has taken no action to deal with an endowment policy, that endowment policy will not re-vest but remains part of the bankruptcy estate.

c A Civil Partnership is a means by which same sex couples may obtain legal recognition of their relationship and gain equal treatment in a wide range of legal matters in line with married couples. (See Legislation Civil Partnership Act 2004)         

Where can I find out more?

Enterprise Act 2002

Section 261 – Bankrupt’s home

Insolvency Act 1986

Section 283A – Bankrupt’s home ceasing to form part of the estate

Section 313A – Low value home: application for sale, possession or charge

Section 385 – Miscellaneous definitions (includes the definition of a dwelling house)

Insolvency Rules

Rule 6.237 – Bankrupt’s Home – Notification of property falling within section 283A

Rule 6.237A – Application in respect of the vesting of an interest in a dwelling-house (registered land)  

Rule 6.237B – Vesting of bankrupt’s interest (unregistered land)   

Rule 6.237C – The court may substitute for the period of three years such longer period as the court thinks just and reasonable in all the circumstances of the case

Rule 6.237CA – Vesting of bankrupt’s estate – substituted period

Technical Manual

Chapter 17 – Appointment of Liquidators and Trustees part 1, paragraph 17.3

Chapter 17 – Appointment of Liquidators and Trustees part 5, paragraph 17.51

Chapter 31.3 – Dealing with freehold & leasehold properties

Chapter 31.3, Part 3

Chapter 31.3, Part 8   

Case Help Manual

Charging Orders under section 313 of the Insolvency Act 1986

Freehold Property: – Solely owned - Registration of a Bankruptcy Restriction

Freehold Property: – Jointly owned - Registering a Form J Restriction

Initial Notices and Letters

Insolvency Practitioners – Appointment by the Secretary of State

Long Term Assets

Meetings – Calling a meeting

Meetings – Requisitioned meetings

Sale of Bankrupt’s Interest in jointly owned property

Sale of Bankrupt’s Interest in solely owned property

OROS Document

Protocol Governing the relationship between ORs and RTLUs

Notices

Technical T38-06  -  Secretary of State appointments in bankruptcy cases with an interest in a property

ISCIS Protocol

Asset Recording

RTLU - Transferring cases

Bankruptcy leaflet

What will happen to my home?

Available from official receiver offices or online at www.insolvency.gov.uk ‘publications’

Forms to be used

BHCERT – Bankrupt's home - certificate of re-vesting

BHLET – Letter to bankrupt advising of re-vesting

BHNOT – Notice to interested parties of dwelling-house  -  Form 6.83

BHREV – Letter to bankrupt advising of re-vesting - re-vesting in one month

LRRABO – Land Registry, register BO or amend registration

MP1 – Letter to the bankrupt and/or the co-owner of a property inviting an offer to purchase the bankrupt’s interest in that property from the official receiver.

Land Registry form RX4 – Application to withdraw a restriction (jointly owned property). Available from HM Land Registry's website, www.landregistry.gov.uk   

Land Registry form RX3 – Application to cancel a restriction (solely owned property) Available from HM Land Registry's website, www.landregistry.gov.uk     

     

Family Home - Up to Review Flowchart 

Family Home - Review to Conclusion Flowchart 

 

Procedure

(Amended March 2011)

Property is identified as the principal residence of the bankrupt, bankrupt's spouse or former spouse, civil partner or former civil partner as at the date of the bankruptcy order.

2 Update ISCIS, (‘Assets’ tab) fully with all known details relating to the property or properties, such as address, joint owner(s) if applicable and mortgagees etc.

3 A valuation of the property or properties will not need to be obtained unless there appears to be sufficient equity to seek the appointment of an insolvency practitioner. The examiner will give instructions on how this should be done, e.g. by website valuation, drive by valuation, by relying on the value given by the bankrupt or as stated in the mortgagee letter, etc (see paragraph 10 and paragraph 14).

4 When there appears to be insufficient equity to seek the appointment of an insolvency practitioner but sufficient interest for the official receiver to act, the value of any relevant property is known and the bankrupt’s interest has been assessed, speak with the examiner regarding options. See Procedure step 5, and action accordingly.

Where there is equity in the property and the circumstances outlined in paragraph 10 above are appropriate, the appointment of an IP trustee should be considered by calling a meeting of creditors or making application for a Secretary of State appointment. See CHM part – Meetings - Calling a Meeting or CHM part – Insolvency Practitioners - Appointment by the Secretary of State.

In cases where the official receiver is trustee and it would be in the creditors’ interests to proceed with a transfer 2 copies of the appropriate form MP1 'Offer to purchase' (available on the ORBS intranet site) letter should be sent to the bankrupt. This form should also be sent to any co-owner(s) where the property is jointly owned. The official receiver should seek to obtain by return a signed copy of the letter(s) by way of acknowledgement.  The return of the MP1 and the bankrupt/ joint owner’s (if appropriate) intention regarding purchasing the official receivers interest should be recorded on ISCIS (‘Assets’ tab) as a note against the relevant property. 

7 Where the official receiver remains trustee the decision on whether or not the case can be transferred to an RTLU no longer depends upon the investigation decision. Where the property is jointly owned a Form J Restriction needs to be registered at the Land Registry. If the property is solely owned ensure that a bankruptcy restriction has been registered with the Land Registry.

8 Form BHNOT ‘notice to interested parties’ (‘Docs’ tab) must be sent to the bankrupt, his or her spouse or former spouse, civil partner or former civil partner. Guidance Notes are attached to this notice.  The BHNOT date should be noted against the property entry on ISCIS, (‘Assets’ tab).  If the date box is unavailable then the BHNOT issue date should be recorded on ISCIS as a note (‘Notes’ tab).

Where an offer to purchase the bankrupt’s interest in a property is received please follow the procedure in the relevant CHM part, ‘Sale of Bankrupt’s Interest in solely owned property’ or ‘Sale of the Bankrupt's Interest in jointly owned property’. If the sale of the interest is likely to be protracted or there are other complex asset related matters, consider an SoS appointment for an IP to become trustee. See CHM part Appointment of Trustees and Liquidator by the Secretary of State.

10 Where there has been no offer to purchase the bankrupt’s interest in a property, the case must be reviewed (usually by an RTLU), 2 years and 3 months from the date of the bankruptcy order, or if the official receiver is not notified of the interest within three months of the making of the bankruptcy order 2 years and 3 months from the date that the official receiver became aware of it (as the 3 year period in which the interest must be dealt with also runs from this date).  The review date should be entered on ISCIS under the relevant property (‘Assets’ tab)

Review Stage

11 An up-to-date valuation of the property must be obtained, if such a valuation has not been obtained within the last 6 months, the examiner/B1 will give instructions on how this is to be done.  This will generally be through the use of an average internet valuation (see paragraph 10A-10E). Current mortgage statements must be obtained and any outstanding mortgages and other charges must also be taken into account when considering this and the information received should be entered on ISCIS (‘Assets’ tab) as a note against the relevant asset.

12 Where the value has increased significantly and the circumstances outlined in paragraph 15 above are appropriate, a Secretary of State application should be sought for an IP appointment. See CHM part – Insolvency Practitioners - Appointment by the Secretary of State.

13 If an offer to purchase the bankrupt’s interest is received, and that value would be in the interests of creditors to accept form MP7 should be sent.  The form should be sent to the bankrupt and any joint owner.  The procedure to be followed is outlined in the relevant CHM part.  Please see CHM part – ‘Sale of Bankrupt’s Interest in solely owned property’ or ‘Sale of the Bankrupt's Interest in jointly owned property’ as appropriate.

14 Following the review if the bankrupt’s interest in the property is less than £1000, steps should be taken to re-vest the property interest in the bankrupt. Any action in relation to this should be recorded on ISCIS against the appropriate asset as a note.

Early re-vesting

15 Where the bankrupt's interest re-vests early, the official receiver should send form BHREV informing the bankrupt that he or she considers that the continued vesting to be of no benefit to the bankruptcy estate or that re-vesting will facilitate a more efficient administration of the estate. The bankrupt's interest re-vests one month from the date on form BHREV.  The re-vesting should be recorded on ISCIS (‘Assets’ tab) against the relevant property.

16 Where the property to be re-vested is on registered land, within 5 business days of the re-vesting (7 days for cases where the bankruptcy petition was presented before 6 April 2010), application should be made to the Land Registry to amend the register(s). The appropriate application to use would depend upon whether the property is jointly or solely owned.  For a jointly owned property Land Registry form RX4 should be used to remove the Form J restriction.  For a solely owned property Land Registry form RX3 should be used. The application should be accompanied by a copy of form BHCERT, a certificate stating that the interest has vested in the bankrupt.

17 Also, where property is on registered land, within 7 days of the application to Land Registry, form BHLET must be sent to the bankrupt and every person who has an interest in the property, (such as the bankrupt's spouse or former spouse, civil partner or former civil partner) and all mortgagees and other charge-holders.

18 Where the property is on unregistered land, form BHLET must be sent to the bankrupt, the bankrupt's spouse or former spouse, civil partner or former civil partner and any other person who has an interest in the property. A copy of form BHCERT should be attached to each notice.

19 If the bankrupt's interest in the property is over £1,000 and no offer to transfer the interest has been received or accepted, the official receiver may consider applying for a charging order. This should only happen as a last resort.

Re-vesting after 3 years

20 At the end of the relevant 3 year period, if no action is taken by the trustee, the interest will automatically re-vest in the bankrupt. Where the property is on registered land, within 7 days of the re-vesting (7 days for cases where the bankruptcy petition was presented before 6 April 2010) application should be made to the Land Registry to amend the register(s). The appropriate application to use would depend upon whether the property is jointly or solely owned.  For a jointly owned property Land Registry form RX4 should be used to remove the Form J restriction.  For a solely owned property Land Registry form RX3 should be used. The application should be accompanied by a copy of form BHCERT (a certificate stating that the interest has vested in the bankrupt).

21 Also, where property is on registered land, within 5 business days of the application to Land Registry, form BHLET must be sent to the bankrupt and every person who has an interest in the property, such as the bankrupt's spouse or former spouse, civil partner or former civil partner.

22 Where the property is on unregistered land, form BHLET must be sent to the bankrupt, bankrupt's spouse or former spouse, civil partner or former civil partner and any other person who has an interest in the property. A copy of form BHCERT should be attached to each notice.