Key Post Update on dealing with family homes in a bankruptcy

[Jim Stafford]

Chris Lehane, the Official Assignee ("the OA"), gave a very useful talk this morning to the Association of Personal Insolvency Practitioners on the very technical issues arising on dealing with family homes and investment properties in a bankruptcy.

Some of the useful "takeaways" from the talk were the following:

• The OA has 3 years to deal with the family home.
• Given that the OA has 3 years to deal with the family home, it was interesting to review his statistics for bankruptcies in 2015. Of the 478 bankruptcy adjudications in 2015, 195 had no interest in a family home, 165 had an interest in a family home which remained in negative equity and which the OA was re-vesting in the Debtor, and only 30 debtors had positive equity.
• Of the 30 debtors who had positive equity, 14 were resolved "informally", and the balance to be resolved through solicitors.
• A cohabiting couple with children, who are not married nor in a civil partnership (as defined under the 2010 Act), are not, for the purposes of the Bankruptcy Acts, residing in a family home nor a shared home. The property is the Bankrupt's PPR and can be sold by the OA without going to Court.
• If there is equity in the family home, the OA will provide the spouse with an opportunity to buy the equity. He will accept staged payments up to a maximum of 12/24 months. (The OA did not disclose his negotiating tactics for dealing with the equity in the family home!)
• The OA will participate in assisting Bankrupts to avail of the Mortgage to Rent Scheme. To date he has only received 18 approaches on the Scheme. My view is that whilst it is possible to participate in the MTR Scheme via bankruptcy, a better solution for some people would be to avail of the Scheme via a Personal Insolvency Arrangement.

Jim Stafford

 

[Bronte]

The bit about the non family, couple in house with their children, how is that a PPR versus a family home? I don’t get that?

 

[RedOnion]

The bit about the non family, couple in house with their children, how is that a PPR versus a family home? I don’t get that?

The definition of a family home in the Family Home Protection Act, 1976
"2.—(1) In this Act “family home” means, primarily, a dwelling in which a married couple ordinarily reside."

 

[Bronte]

So how then is it a family home if you’re in a civil partnership if the definition is married?

Does the bankruptcy legislation define a family home as one that is so defined under the Family Home Protection Act.

And what about divorced people with one parent in the home. Is that not a family home as they are no longer married.

 

[RedOnion]

So how then is it a family home if you’re in a civil partnership if the definition is married?

It's not. It's a 'shared home'. The protections are almost identical, but provided for in a different piece of legislation.

But you're talking about a different thing.

The OP referred to a "cohabiting couple with children, who are not married nor in a civil partnership"

 

[Brendan Burgess]

Jim

That is very interesting so I have made it a Key Post.

Is there any updated systematic article on the issues dealing with the family home?

From speaking to PIPs recently, it seems clear that PIAs are nearly always the way to go. They are much better than Mortgage to Rent. The lender probably does better. The borrower gets to keep their home.

Brendan

 

[Bronte]

It's not. It's a 'shared home'. The protections are almost identical, but provided for in a different piece of legislation.

But you're talking about a different thing.

The OP referred to a "cohabiting couple with children, who are not married nor in a civil partnership"

What different legislation?

It’s clear to me two people or even one parent are living in a family home. What else is it.

 

[RedOnion]

What different legislation?

It’s clear to me two people...

A very common, and often expensive mistake to make.

We are talking about legal protections that apply to the 'family home'. There is a legal definition of 'family home'. The aforementioned legal protections apply only to those homes that meet the legal definition.

There are different legal protections for 'shared home' (civil partnership), and co-habiting couples, under different pieces of legislation.

Frankly, it doesn't matter what you understand 'family home' to mean. When it comes to legal matters, it's the legal definition that counts.

 

[Jim Stafford]

Is there any updated systematic article on the issues dealing with the family home?

Brendan

The core legislation on family homes in bankruptcy has been virtually unchanged for decades. The last significant change was a few years ago when the legislation was amended obliging the OA to deal with the family home within 3 years: Previously he could take years to decide what to do with the family home.

You do get other changes in legislation impacting such as the legislation introducing PIAs, Civil Partnerships etc The option of Mortgage to Rent has only recently become available.

I recently updated the following article which outlines in detail what happens the family home:

http://www.frielstafford.ie/personal-insolvency/what-happens-the-family-home-in-a-bankruptcy/

Jim Stafford