Could I Lose My Home If My Company Goes Into Liquidation?
Your home is generally not at risk if your limited company goes into liquidation, as the company and its debts are legally separate from you. However, exceptions exist if you’ve provided a personal guarantee, owe the company via a director’s loan, or acted improperly leading up to insolvency.
Even if these conditions apply, it doesn’t automatically mean your assets, including your home, will be seized. For this to happen, you would need to be forced into personal bankruptcy, as I’ll explain below.
When Might Your House Be at Risk?
As a director of a limited company, your personal assets, including your house, could be at risk in several scenarios. Here’s how each situation could potentially lead to the loss of your home:
You’ve Signed a Personal Guarantee
If you’ve signed a personal guarantee for company debts, you’re personally liable if the company can’t pay. Creditors can:
Failure to repay could lead to personal bankruptcy proceedings
In bankruptcy, your house could be sold to repay creditors
You’re found guilty of Wrongful or Fraudulent Trading
If found guilty of these offences:
The court can order you to contribute to the company’s debts
Large contributions could lead to personal bankruptcy
Your house could be sold as part of bankruptcy proceedings
HMRC Sends You a Personal Liability Notice (PLN)
If HMRC issues a PLN for unpaid National Insurance Contributions:
You become personally liable for the company’s NIC debt
HMRC can pursue legal action to recover the debt
This could lead to bankruptcy if you can’t pay, putting your house at risk
Co-Owned Property Considerations in Bankruptcy
When a property is co-owned, and one owner faces bankruptcy, the situation becomes more complex.
The trustee in bankruptcy can only claim the bankrupt individual’s share (beneficial interest) in the property, not the entire property.
The trustee has several options:
Sell the bankrupt’s share to the co-owner
Force a sale of the entire property
Delay action if there’s negative equity
Special considerations apply if the property is a matrimonial home, as per the Insolvency Act 1986, Section 336. The court must balance the interests of creditors against those of the spouse or civil partner.
What Happens to Company Debts in Liquidation?
During insolvent liquidation, if there isn’t enough money from selling the company’s assets to pay all the debts, then those unpaid debts are typically written off. This means creditors may not get back all the money they are owed, and in some cases, they might not get anything back at all.
Once the liquidation process is complete and the available assets have been distributed, any remaining debts that cannot be paid are effectively cancelled and cannot be pursued further against the company.
FAQs: Will I Lose My House If My Company Goes Bust?
What happens to my house if I’ve signed a personal guarantee?
If you’ve used your house as collateral for a personal guarantee and the company can’t repay the debt, the creditor can pursue legal action to force the sale of your house to recover the money owed.
Can HMRC force the sale of my home if my company owes taxes?
HMRC can’t directly seize your home for company tax debts. However, if they issue a Personal Liability Notice for unpaid National Insurance Contributions, and this leads to your bankruptcy, your house could be at risk.
Are jointly owned properties protected if one owner’s company fails?
Joint ownership complicates matters but doesn’t provide full protection. In bankruptcy, the trustee can claim the bankrupt’s share of the property, potentially forcing a sale.
Can liquidators seize my personal assets, including my house?
Liquidators can’t directly seize your personal assets. However, if they uncover issues like wrongful trading, they can pursue legal action that could ultimately put your personal assets at risk.
