Selling a house in bankruptcy: what happens to your home as a business owner?

If you are self-employed or a company director and face selling a house in bankruptcy, the procedure differs from that of a private individual in debt. A bankruptcy runs through the enterprise court and a trustee, not through a debt mediator. In this article you will read when your home falls into the bankruptcy, who sells it in that case, how to protect your family home in advance and what you can still do yourself as long as you are not bankrupt.

Bankruptcy or collective debt settlement: which applies to you?

In Belgium there are two separate procedures for people who can no longer pay their debts. Collective debt settlement is intended for private individuals who are not a business. Bankruptcy applies to businesses. Since the reform of insolvency law, set out in Book XX of the Code of Economic Law, it also covers natural persons who carry on a self-employed activity: sole traders, liberal professions and self-employed directors.

The difference matters for your home. In a collective debt settlement you remain the owner and you sell with the court's permission, together with the debt mediator. How that works is explained in our article on selling a home in collective debt settlement. In a bankruptcy, a trustee takes over the management of your assets. That changes who decides on the sale.

If it concerns the bankruptcy of a company, for example a BV/SRL of which you are the director, the situation is different again. The company has its own assets. Your private home then in principle stays outside the bankruptcy, unless you gave a personal guarantee or are held liable as a director.

When does your home fall into the bankruptcy?

If you are declared bankrupt as a natural person running a business, you lose control of your property from the date of the judgment. This is called divestment. Everything you own, including your home, in principle goes into the estate that the trustee manages on behalf of the creditors.

There are exceptions. Certain assets are exempt from seizure by law, and a family home for which you registered a declaration of unseizability in time can stay out of reach of the creditors covered by that declaration. Your matrimonial property regime also plays a role. If the home is jointly owned by you and your partner, or co-owned with someone else, as a rule only your share falls into the estate. The trustee can then ask for the property to be divided, which in practice often still leads to a sale of the entire home.

With a company the question is simpler: if the home is in the company's name, it belongs to the estate. If it is in your own name, it stays outside, unless a creditor can hold you personally liable.

Who sells the home and how?

If the home falls into the estate, the trustee sells, not you. The trustee needs permission from the supervising judge or the enterprise court to do so. As the bankrupt party, you therefore cannot appoint an estate agent, accept an offer or sign a sale agreement yourself.

The sale can take place publicly through a notary, nowadays usually online via Biddit. How such an auction works is explained in our article on selling at public auction via Biddit as a seller. The court can also allow a private sale when it promises a better price. It is the trustee who decides whether an estate agent is brought in.

The proceeds go to the estate. Creditors with a mortgage or preferential claim on the home are paid first, usually the bank that granted your home loan. Whatever remains is distributed according to the statutory order of priority. More on repaying an outstanding loan when you sell can be found in our article on selling a house with an outstanding mortgage.

Protecting your family home in advance

Self-employed people can make a declaration of unseizability for their family home before a notary. Once registered, creditors for business debts that arise afterwards can no longer have that home sold. The protection therefore only works for the future: debts that already existed before the declaration was registered can still reach the home. Private debts and debts owed to creditors not covered by the scheme are not stopped.

Which assets exactly can fall under the declaration and what it costs is best explained by a notary. Do not wait until problems arise. The earlier the declaration is in place, the more debts it shields.

Have you also heard about debt discharge? That is something else. A bankrupt natural person can ask for discharge of the debts that remain after the bankruptcy is closed. That gives a fresh start, but it does not stop the trustee from selling the home during the bankruptcy.

Selling yourself before it comes to that

If your business is under pressure but you are not yet bankrupt, you are still free to sell your home. Sometimes that is the wisest choice: a well-prepared sale usually yields more than an auction under time pressure, and with the proceeds you can pay off debts before they grow further. A free valuation of your home gives you a first idea of what is achievable.

Do pay attention to the price and the timing. A sale shortly before a bankruptcy can later be examined by the trustee. Legal acts carried out in the so-called suspect period, or sales well below market value that harm creditors, can be declared unenforceable against the estate. A sale to family at a friendly price is therefore risky. A market-based price, backed by a valuation from a licensed estate agent and recorded by the notary, is your best protection.

If you want to sell quickly and correctly, an estate agent who knows the local market will help. Via compare estate agents you receive free proposals from up to three licensed estate agents in your region. Besides a sale, also consider a judicial reorganisation: it allows a viable business to obtain temporary protection from its creditors.

What if your partner or co-owner goes bankrupt?

If you are not a business owner yourself but your partner is, the bankruptcy affects you too. If you are married under the statutory regime, the joint assets can be used for certain debts of your partner. If you are unmarried or married with separation of property, usually only your partner's share falls into the estate. You remain the owner of your share, but the trustee can ask for the property to be divided.

In such a situation you can negotiate with the trustee about buying out your partner's share, or choose together for a private sale of the entire home. A realistic valuation is then the starting point of every discussion. If you want to sell and secure your share of the proceeds, compare estate agents near you and have the sale handled by your notary.

In conclusion

In a bankruptcy it is no longer you but the trustee who decides on the sale of your home, under the supervision of the enterprise court. Your room to act yourself lies mainly before the bankruptcy: a timely declaration of unseizability, or a fair sale at market value. In any case, get help from a lawyer specialised in insolvency law and from your notary, especially if your home is at stake.