Hi FamilyTies and welcome.

There are some pretty complicated issues involved here, so I'll hand over to our experts (Mark, Kevin, Shona and Chris) for when they next visit the forum...

Hopefully someone will be along soon.

Hi Familyties

If she goes bankrupt, the one half share of the net equity would belong to the trustee. Your parents would not be able to transfer this back without legal challenge.

It may come down to numbers as the trustees interest is one half share of the net equity. If this is less than repaying her debts st stop bankruptcy, then it may be an option.

The life rent may be an issue, but would not stops the trustee gaining a half share interest.

Mark

HI

This is never a nice situation. I assume your parents house has no mortgage on it? The problem lies that if your brother goes bankrupt the house would still be looked at. The trustee would look at the your brother's position on transferring the house back to your parents. If this transaction made him insolvent, then it is a gratuitous alienation. This is also the case if he was insolvent before the transaction, which it sounds as though your brother is - given his house is over-secured. Sorry, but if he goes down this route,the trustee will have an interest in the house, although they cannot put your parents out. The trustee would just remain in office until such times as the asset could be realised.

If it is any consolation I imagine any trustee would de open to coming to a deal regarding the half share of the property, rather than having to remain in office for potentially a very long time in order to be able to sell it when your parents pass away.

Therefore it may be possible for one of you to buy out the trustee's interest for a cut-price figure. This kind of thing could be discussed with an insolvency practitioner before even applying for bankruptcy or a trust deed, so that hopefully a solution is found in advance.

My parent's house is mortgage free and title is now held solely by myself and my brother. The solicitor who dealt with the 'life rent' has advised that nothing, not even bankruptcy, can force my parents out while they are alive, so that's something.

Mark, you said if my sister-in-law goes bankrupt one half share of the equity would belong to her trustee. How? Surely she has no claim on the property?

Also, if she goes down the road of a Trust Deed or bankruptcy would she be liable for a half share of the joint debts (as well as her sole-name debts) or would the creditors seek the whole amount from my brother? Is that not a case of having their cake and eating it?

A well-meaning friend also mentioned 'marital debt'...any guidance on that?

Sorry FamilyTies, I misread your post. If your brother was to follow the bankruptcy/Trust Deed route then his half would vest in the Trustee, not your sister in law as she has no involvement in it.

The liferent is an interesting concept and I guess would work almost like a Trust, to keep the Trustee at bay. I think a lot would depend on exactly how this was set up.

Mark

Hi FamilyTies.

In terms of the joints debts, the creditors really can have their cake and eat it.

Any party to a joint debt is fully liable for the full balance.

They could therefore seek payment of the full amount from your brother, though that amount might later be reduced if they received a dividend from a trust deed or sequestration related to your sister-in-law.

I'm not sure what the term "marital debt" would refer to.

Does it make any difference at all if the debts are agreed and split between my brother and his wife in a Minute of Agreement (Separation Agreement) or are they both jointly liable for the joint debts until they are repaid?

I think the lender will rely on the original credit agreements FamilyTies.

These are likely to specify that each borrower is "jointly and severally liable" for the full amount of the debt.

Thanks everyone for all your help.