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The home

If a bankrupt owns, or is purchasing, a home which is in the bankrupt's name, the trustee has the right to sell the property and distribute any equity to the creditors. This does not apply to homes purchased with Defence Service Homes loans which are protected under the Defence Service Homes Act 1918 (Cth) and the Director will rarely give permission for the sale to take place.

In the case of jointly owned property, when one owner becomes bankrupt the trustee will become registered as a 'tenant in common' of the home with the non-bankrupt owner, or will lodge a caveat on the title to protect the bankrupt's interest.

The registration of the trustee does not prevent the mortgagee selling the property if the mortgage payments fall into arrears. The jointly owned home may be sold in any of the following ways:

  • the other owner has first option to buy, either for cash or by instalments, the bankrupt's interest (or share) in the home from the trustee.
  • a joint owner who cannot afford to buy the bankrupt's share may agree with the trustee to sell the home. Both the trustee and the non-bankrupt joint owner usually receive equal shares of any money left over after the mortgage and expenses are paid.
  • if the joint owner refuses to co-operate, the trustee can apply to the Court under the Law of Property Act 1936 (SA), for an order that the property be sold and the proceeds divided between them. The cost of the trustee going to Court can be very high, and is taken out of the proceeds of the sale of the property. In that case, it is far better to co-operate the trustee to preserve any equity available to the non-bankrupt owner.

If the home was bought with, or substantially with compensation money for an injury it cannot be taken, see property a bankrupt can keep.

The home  :  Last Revised: Wed Sep 28th 2005
The content of the Law Handbook is made available as a public service for information purposes only and should not be relied upon as a substitute for legal advice. See Disclaimer for details. For free and confidential legal advice in South Australia call 1300 366 424.