They may look at as your father in law was stashing money in view of his pending bankruptcy. im not sure they can reclaim it but they will look into it and was proof of what youve done with it. its a messy process and the courts may ask for your income details etcI expect that the Trustee in Bankruptcy could pursue the money if it can be shown that your father-in-law was trying to evade creditors, especially as he still benefited by living in a house which, in effect, he contributed to the purchase.
It may help if you can show that all his debts were paid off and the subsequent bankruptcy arises from events totally subsequent to the gift. Also you may show records including Income Tax returns declaring a commercial rent for the house from father-in-law.
Otherwise, it may be simpler to offer to pay off some of his debts at a discount for early settlement. Have an ‘informal’ chat with the Trustee in Bankruptcy to see if this might be acceptable.

 

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