What Happens To A Jointly Owned Asset In MAP Bankruptcy?

Joint ownership is one of the commonest reasons an application does not work. A car in two names, an old savings account with a parent, a half share in a flat.

What follows sets out what is settled, what is not, and what to do about the gap. How a MAP works covers the tests these questions sit inside.

Does owning a share of a house stop you using a MAP?

You must not own land. Section 2(2)(e) rules out a MAP for anyone who does, whatever it is worth.

There is no carve-out for a share

Section 2(2)(e) says the debtor does not own land, and it says nothing about how much of it. A joint interest in heritable property defeats the application.

This is a condition about ownership rather than value. There is no valuation exercise and no equity test attached to it.

Negative equity does not help

A half share in a property worth less than the mortgage on it is still ownership of land. The condition is not asking what the share is worth.

Whether owning a house or land rules you out sets the bar out in full.

It bites after the award too

Acquiring land during the six months is one of the situations AiB names as moving a case out of the Minimal Asset Process. Inheriting a share of a house is the usual way that happens.

Report it rather than waiting to be asked. The alternative is a determination arriving without warning.

What it leaves open

Full administration sequestration has no equivalent bar, and neither does a protected trust deed or a debt payment programme. Owning property does not close every route.

The difference between the two bankruptcy routes is at a MAP against full sequestration, and AiB also lists land ownership among the reasons a case that started as a MAP is moved to full administration.

How is a share of a jointly owned car or goods valued?

No source addresses how a jointly owned item is counted, whether at its full value or at your share of it. A joint bank account is the case most people ask about and it is not answered anywhere published.

The tests, and the word they turn on

Section 2(2)(c) caps the total value of the debtor’s assets at £2,000 and section 2(2)(d) caps any single asset at £1,000.

Everything turns on what counts as an asset and how it is valued. The Act uses the word and defines neither.

Both figures have stood unamended since 30 November 2016, and so has the £3,000 vehicle disregard. None of them tells you what to do with a half share.

The power that was never used

Nothing sets out how an asset is to be valued for these limits. Section 2(4) allows valuation regulations to be made and none ever has been, so ask your money adviser how yours will be treated.

So there is no provision to point at on either side of the argument. How assets are valued against the £2,000 limit sets out the three valuation instructions AiB does publish.

What is answered and what is not

The vehicle disregard in section 2(3)(b) is the nearest thing to a clean answer, and even it is keyed to a vehicle owned by the debtor, which is the wording the joint case turns on.

What happens to a joint bank account?

This is the sharpest version of the question, and nothing published answers it. AiB tests savings across accounts and never says how a shared balance is treated.

What AiB does say

The evidence requirements checklist asks for statements for all bank accounts held by the debtor, verifying balances at the date the application is signed.

The Accountant in Bankruptcy’s evidence checklist treats savings above £1,000 across all your accounts as defeating a Minimal Asset Process application. That is its practice rather than something the Act states.

What it does not say

No sentence in the checklist mentions joint ownership at all. Neither does AiB’s guidance on moveable assets, which covers bank accounts under its own heading.

So a £1,600 balance in an account held with somebody else has no published answer. Whether that is £1,600 against the tests or £800 is simply not stated.

Two practical points that are settled

Nothing in the Act freezes an account. Section 78(1) vests the estate of the debtor, and whether your bank account is frozen covers what AiB and mygov.scot actually say.

And the aggregation rule is practice rather than law, which what happens to your savings in a MAP explains.

Has anybody addressed this anywhere?

No, and that finding is the result of checking rather than of not looking. Eight sources that could have answered it were read and none does.

Everything that was checked

mygov.scot’s page on assets is the nearest thing to a plain-language answer and it deals with pensions and income rather than with anything held jointly.

The one passage people misuse

AiB’s debtor guide does have a heading asking what happens where property is jointly owned. It is entirely about the family home.

A MAP debtor cannot own land at all, so that passage can never apply to a Minimal Asset Process. Its nearest useful material sits in chapter 4 on assets, which says a valuation should be obtained for property the debtor part owns without saying whose share is valued.

What can be said with confidence

Section 78(1) vests the whole estate of the debtor in the trustee. A debtor who owns half a car owns half a car, which is ordinary Scots property law.

But the entry tests are not vesting provisions. They are thresholds keyed to a word the Act leaves undefined, and that is a different question.

Which jointly owned things are left out of the count?

Two categories, both in section 2(3): property that would be excluded from vesting, and a qualifying vehicle.

Property that would not vest

Section 2(3)(a) removes from the calculation anything that would be excluded from vesting in the trustee under any enactment. Basic household goods sit inside that.

National Debtline puts the same point in plainer words: basic household items do not count.

The vehicle disregard, and how joint ownership complicates it

A vehicle you reasonably require and which is worth no more than £3,000 is left out of the asset calculation altogether, under section 2(3)(b).

The disregard applies to a vehicle owned by the debtor and reasonably required. A car on finance is not owned outright, which is why the checklist asks for the agreement instead of a valuation.

Above £3,000 there is no disregard at all. Whether you can keep your car in a MAP works through the figures.

Does your MAP affect the other owner?

Their own property is not your estate. Beyond that, very little is published about what a Minimal Asset Process means for somebody who owns something with you.

What is clear

Section 78(1) vests the estate of the debtor. Somebody else’s money and somebody else’s property are not part of it.

Section 145(1) discharges you of the debts and obligations you were liable for at the date of sequestration. It is your discharge.

What a co-owner should check

A debt in both names needs its own advice

Where somebody else is liable for the same debt, their position is a separate question and they should take their own advice. Do not assume your discharge answers it.

What should you do before you apply?

Get the arguable points decided in advance rather than afterwards. Where nothing is published, an answer from AiB before the application is the only certainty available.

The list to work through

Ask, and ask in writing

Your money adviser can put the question to the Accountant in Bankruptcy before anything is signed. A written answer is worth more than a general article, including this one.

That is the same advice the sources themselves lead to. Whether you are eligible for a MAP runs through all eight conditions.

Do not guess at a figure

Putting half the value on the form because it seemed reasonable is the thing to avoid. If the point is arguable, say so on the application rather than deciding it yourself.

An inaccurate figure is what leads to a case being transferred later, and AiB treats that differently from an honest change of circumstances.

And check whether another route avoids the problem

A Debt Arrangement Scheme writes off none of the money you owe. Interest, fees, penalties and charges stop, so the balance stops growing, but the principal is repaid to the last penny.

It has no asset test at all, which removes the question entirely. A MAP against the Debt Arrangement Scheme compares them on figures.

Pensions are the other genuine gap in this area, covered at whether you lose your pension in a MAP.