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Why are Bankruptcy Searches carried out in the conveyancing process ?

The reason a Bankruptcy search is carried out by the purchaser’s conveyancing solicitor as a part of the conveyancing process is to establish whether the purchaser is, or is about to be, bankrupt. The bankruptcy search is carried out purely for the benefit of the lender. Where the purchaser is a cash buyer there is no need for the conveyancing solicitor to carry out this search.

It is likely that the lender will withdraw their offer if they find that the purchaser (borrower) has or is about to make a bankruptcy filing. Where the purchaser does not need a mortgage there is nothing to stop a bankrupt purchasing, however it is likely of course that the trustee in bankruptcy/official receiver will claim that property for the bankrupt’s creditors.

Where a notice of the bankruptcy is registered at Land Charges prior to completion of a mortgage then the trustee in bankruptcy’s interest ranks in priority to the lender’s mortgage, meaning that the bank or building society, rather that having the property as security, simply joins what may be a long queue of creditors.

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