Personal Difficulties >  Dealing with the family home

Sequestration: Dealing with the family home

The various recognised professional bodies who deal with insolvency matters refer to the appropriate legislation together with Statements of Insolvency Practice for regulating the activities of their members. In addition, the various recognised professional bodies agree upon guidance notes for dealing with specific issues and noted below are the guidance notes for general application in England (but also likely to be referred to in Scotland) in terms of dealing with one of the most sensitive issues: the family home. It should be noted that these notes are for guidance only and many insolvency practitioners will have systems in place which may not be wholly in line with the notes, although it is anticipated that they will follow the general spirit thereof.

Introduction

It is in the interests of the debtor i.e. the person who has been sequestrated, and the creditors, and in the wider public interest, that a family home, and any other residential property available for use by the debtor or the debtor’s immediate family, are dealt with fairly and quickly in a sequestration. This can happen only if the debtor and others who may have an interest in the properties have sufficient information to understand how the sequestration affects them, and the options available to them. Failure by a trustee to provide information and explanations can prolong the realisation process, cause anxiety and distress to those involved, and give rise to complaints.

Affected parties

Where the debtor has an interest in a heritable property falling within the estate, the trustee should consider at an early stage whether the property is or has been the home of any person other than the debtor, and if that person could be affected by the sequestration and the sale of the property.

Those potentially affected include:

It is also recommended that a trustee:

Timing of communications

After the initial communications outlined above, it is recommended that a trustee writes regularly to the debtor and other affected parties pending realisation of the property. Whilst such communications should be as circumstances dictate, it is recommended that this should be normally every 12 months. The maters to be dealt with might include (as appropriate to the circumstances):

A trustee has a duty to obtain a proper price for the benefit of the estate, but the sequestration should not be unnecessarily protracted and account should be taken of the effect of future costs. It is recommended that the consequences of any action, or delay, in respect of a property should be explained to affected parties and where appropriate, to creditors.

If an affected party makes an offer to purchase the trustee’s interest in the property the trustee should deal with the offer promptly and courteously. If the offer is rejected, the trustee should provide an explanation of why the offer is regarded as inadequate.

Guidance for affected parties

As noted above, it is recommended that a trustee advises the debtor and other affected parties to take independent advice in relation to the property. It may be appropriate for the trustee to recommend, in the first instance, contact with a solicitor or Citizens’ Advice Bureau. The accountant in bankruptcy’s leaflet AB13 “Debtor – What happens to my home?” is available via www.aib.gov.uk.

Duty of care

Nothing in the guidance notes imposes or implies any duty of care by an insolvency practitioner to a debtor, or any person with an interest in a property, over and above what may be imposed by legislation or case law.