If you are dealing with a debt problem the overriding principle is that you are only responsible for accounts which are in your name.

If your partner has debts in their name that they are unable to pay and they decide to go Bankrupt you do not become liable to pay anything towards these (unless the accounts are in joint names). This rule is no different whether or not you are married or have lived together for many years.

Even if you have been an additional card holder on a credit card account and used the card you are not responsible for paying the balance if you are not a joint account holder. However there are nevertheless certain implications of Bankruptcy that you do need to be aware of.

Do you have to declare your income if your Partner goes Bankrupt?

If your partner goes bankrupt they will not only be asked about their income but also any income that you bring into the household. You might find this strange given that you are not liable for your partner’s debt.

The reason why this information is required (and must be given) is that the official receiver (OR) is trying to establish if your partner can afford to make any payments towards their debts.

In calculating this, the OR must take into account the contribution you make to the household expenses from your income.

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You must pay your share of the household bills

It is not fair for your partner to claim that they pay for all the household bills and as a result cannot afford to make any contribution towards their debt if you should also be contributing towards these.

Your contribution to the bills will therefore automatically be considered as a proportion of what you earn. For example, if you earn 50% of the household income, you will be expected to contribute towards 50% of the expenses.

After this, if you have any money left over (disposable income) this is yours to keep. It cannot be touched by the OR or included in any payment that your partner has to make towards their debts. Only their disposable income will have to be paid.

BMD Tip: This can be seen as an advantage of Bankruptcy over an Individual Voluntary Arrangement (IVA) where creditors could demand that a partner’s income is included when calculating disposable income as they have had the benefit of the things paid for when building up the debt.

What if you own a property in joint names and your Partner goes Bankrupt?

If you are a joint owner of your property with your partner your portion of the equity can not be touched. However one of the things you must consider carefully is that your partner’s share of any home equity will transfer to the Official Receiver and they are obliged to realise this.

Ultimately this could mean the OR could force the sale of the property to release your partner’s share of the equity. If this happened you would receive your portion of the equity. However you will not be able to prevent the sale just because you are joint owner and you do not want to sell.

In this situation, the only way you may be able to prevent the sale of the property is for you to make an offer to buy your partner’s equity from the receiver. The receiver would therefore have no further need to sell the house.

Understand all the implications of your partner’s Bankruptcy

In certain circumstances Bankruptcy can be a very effective way of resolving a debt problem. However you or your partner should never use this debt solution unless you have taken appropriate advice and understand exactly what it will mean for you both.

One of the advantages of your partner declaring themselves bankrupt is that you will not have to pay towards their debt.

However, if you have your own income, you will still have to make a reasonable contribution towards the household expenditures and understand how any property in joint names will be affected.