Bankruptcy and property ownership

I own the equity in my home. The legal owner has been made bankrupt. Will I lose my home?

You may own the equity in your home, but unless you can provide convincing proof that you do, the law will presume that the equity belongs to the trustee in bankruptcy. The trustee in bankruptcy is entitled to seek a sale of the property so that the bankrupt’s creditors can be repaid from the sale proceeds. If more than one year has passed since the bankruptcy, the court will assume (unless the circumstances are exceptional) that the interests of the creditors outweigh all other interests.

If a trustee in bankruptcy applies for an order for sale, the bankrupt might try to argue that someone else (such as a relative) owns the equity. The High Court case of Armstrong v Bhattacharya is a useful illustration. Judgment was handed down by ICC Judge Greenwood on 14 March 2025.

The trustee in bankruptcy sought an order for vacant possession and sale. The property was worth approximately £6 million. It was a Victorian building divided into six flats. The bankrupts, who were named Mr and Mrs Bhattacharya, lived in the first floor flat.

Mr and Mrs Bhattacharya argued that the equity in two of the other flats was owned by their adult daughters pursuant to resulting trusts. In 2012, Mrs Bhattacharya’s sister Mrs Ghosh had apparently given each daughter £750,000, which was used to discharge secured borrowing on the property. Resulting trusts are discussed in our previous article: Property rights unveiled: Can you make a claim without tying the knot?

ICC Judge Greenwood rejected the resulting trust argument and held that Mr and Mrs Bhattacharya owned 100% of the equity in the property at the time of their bankruptcy. In reaching this conclusion, the judge noted that:

• The resulting trust argument was inconsistent with the documentary evidence. For example, in August 2020, Mr and Mrs Bhattacharya each produced and signed a proposal for an individual voluntary arrangement supported by a declaration of truth. In their proposals, Mr and Mrs Bhattacharya each listed the property as one of their assets and confirmed that they owned it legally and beneficially.
• There was no witness evidence from the daughters and no reason given for its absence. Neither daughter applied to be joined to the court proceedings and neither of them expressed any formal opposition. As a matter of common sense, the court is able draw adverse inferences from the absence of evidence which it might otherwise expect to be produced.
• The legal basis for the Bhattacharyas’ case was not supported by any cited authority, nor otherwise developed by their barrister to any extent. 
• Mr and Mrs Bhattacharya had applied multiple times, unsuccessfully, to annul the bankruptcy orders. Some of those applications had been dismissed by judges as having been “totally without merit”.

ICC Judge Greenwood ordered vacant possession of the property to facilitate the sale.

The Birketts view

If the Bhattacharya family had obtained good legal advice at an early stage, they may have managed to prevent the sale of the property. As it was, they failed to present their case in a convincing manner. The judge was not provided with evidence from key witnesses and inconsistencies in the documentary record were not explained adequately.

If you own the equity in your home and if you are not the legal owner, you should take independent legal advice as soon as possible to ensure that your position is protected. This is even more important if the legal owner is in financial difficulty or has been made bankrupt. At Birketts, we are well placed to advise you on your position and (if relevant) to present your case to court as persuasively as possible.