Bankruptcy and jointly owned property: what happens to a co-owner’s share

16 Oct Bankruptcy and jointly owned property: what happens to a co-owner’s share

When a co-owner becomes bankrupt, their trustee in bankruptcy becomes the owner of the bankrupt’s share of the property, and the other co-owner cannot deal with the property without the trustee’s consent. The other co-owner can offer to buy the trustee’s share, or the parties can agree to sell. If they cannot agree, the trustee may take legal action to have the property sold.

What changes on bankruptcy

AFSA explains that when a person who owns a house with others becomes bankrupt, their trustee becomes the owner of their share. The bankrupt person no longer has any legal capacity to deal with the property, and the co-owner cannot deal with it without the trustee’s consent. If the co-owner is also bankrupt, the same trustee may own the whole property, or each bankrupt’s trustee may own a share.

The trustee may lodge a caveat over the property to protect their interest, or transfer the bankrupt’s share into the trustee’s name through the land titles office.

The co-owner’s options

AFSA describes these options for a co-owner who is not bankrupt:

• Buy the trustee’s share. The offer should reflect what the trustee would get from selling on the open market. The trustee does not have to accept an offer simply because it comes from a co-owner, because the trustee’s duty is to get the best financial result for creditors.
• Sell the trustee’s share to someone else the parties know, such as a relative.
• Agree to sell the whole property on the open market, with the proceeds shared according to each owner’s share after the mortgage and sale costs.

If there is a mortgage, the lender is paid from the sale first. AFSA notes that the co-owner may be liable for any shortfall still owed to the secured creditor after the sale.

If the parties cannot agree

If agreement is not possible, the trustee may take legal action to have the property sold. If the court allows the sale, the trustee can pay the sale costs from the proceeds and divides the rest with the co-owner according to their shares. In NSW, the court process for selling property held in co-ownership is an application under section 66G of the Conveyancing Act 1919, which any co-owner can make. See our guide to forcing a sale of jointly owned property in NSW.

When the bankrupt is not on the title

If the bankrupt person has no financial interest in a partner’s house, the trustee cannot claim it. But AFSA states the trustee can investigate whether the bankrupt has a financial interest, even if they are not on the title. The trustee may ask about whether the bankrupt lives there, contributes to the mortgage or other joint expenses, when the property was bought, when the relationship began, and the couple’s intentions over time.

After the bankruptcy ends

The trustee keeps a legal interest in the property even after the bankruptcy ends, and may sell it later if equity grows, for example as the mortgage is paid down or values rise. AFSA states the time limit for the trustee to deal with the property is generally six years from discharge, with variations depending on circumstances.

Transfers made before bankruptcy

A trustee can investigate property the bankrupt owned before the bankruptcy, including a house given away for little or nothing, including to a spouse, or sold for less than it was worth. The trustee may be able to reverse the transaction and recover the property or its value.

Related guides

• Jointly owned property disputes: forcing a sale in NSW
• Joint tenants vs tenants in common in NSW
• Severing a joint tenancy in NSW
• Bankruptcy
• Personal insolvency agreements
• Trustee for sale appointments
• Buying out a co-owner in NSW
• Occupation fees and credits when one co-owner lives in the property

Common questions

What happens to a jointly owned house when one owner goes bankrupt?

The bankrupt owner’s share vests in their trustee in bankruptcy. The bankrupt can no longer deal with the property, and the other co-owner cannot deal with it without the trustee’s consent.

Can the co-owner buy the bankrupt’s share?

Yes. The co-owner can make an offer to the trustee. The offer should reflect what the trustee would get on the open market, and the trustee does not have to accept it simply because it comes from a co-owner.

Can jointly owned property be sold if one owner is bankrupt?

Yes. The parties can agree to sell, or, if they cannot agree, the trustee may take legal action to have the property sold. In NSW, the court process for co-owned property is an application under section 66G of the Conveyancing Act 1919.

Can the trustee claim my partner’s house if I am not on the title?

Only if you have a financial interest in it. The trustee can investigate whether you have one, for example through contributions to the mortgage or other joint expenses, even if you are not on the title.

Does the trustee’s interest end when the bankruptcy ends?

No. The trustee keeps a legal interest after the bankruptcy ends. AFSA states the time limit to deal with the property is generally six years from discharge, depending on circumstances.

Sources: AFSA, What happens to my house?; Conveyancing Act 1919 (NSW), section 66G. This article is general information, not legal advice about your circumstances. Last reviewed: 16 October 2026.