Your Partner is not responsible for your debts if you go bankrupt. However they may be affected in other ways.
Jump to article contents:
- Does your Partner have to pay your debt?
- Will your Partner’s Credit Rating be affected?
- How will a jointly owned property be affected?
- Can you keep your joint bank account?
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Does your Partner have to pay your Debt if you go Bankrupt?
Your partner is not liable to pay your debts even if you go bankrupt. A third party cannot be forced to pay debt that you cannot or will not repay. This is the case even if you are married.
Nevertheless you will have to provide information about your partner’s income. This is so the Official Receiver (OR) can make sure sure they are paying a fair share of the household expenses.
The OR will take this into account when considering how much of your income should go towards the expenses and how much you can afford to pay towards your debts.
If you have joint debts your partner remains liable for the full balance of these. If they cannot afford the payments from their income they may also need to consider a debt solution.
Will your Partner’s Credit Rating be affected if you go Bankrupt?
When you go bankrupt your credit rating is negatively affected. However this does not happen to your partner or anyone else who lives with you. The record of your bankruptcy does not appear on their credit file.
This means they are still free to take out new forms of credit in their name. They will pass lender’s credit checks as long as they have no debt problems of their own.
There is a small possibility that information from your file could be mistakenly mixed up with their’s. If they suspect there is a problem they should check their credit file.
Your partner should still be able to get credit while you are bankrupt. Their credit rating is only at risk if you have joint debts which they cannot pay.
How will a jointly owned Property be affected?
If you own a property in joint names your share of any equity will be transferred to the OR. However your partner’s share does not have to be handed over. It is not at risk and remains their’s at all times.
Your share of any equity will have to be released. One option is for your partner to raise the funds required. They may have savings of their own or you might choose to re-mortgage the property to achieve this.
If there is considerable equity and you or your partner simply cannot release it the OR might issue a charge for the value of your share. In extreme cases they can force the sale of the property.
If the property is force sold your partner’s share of any equity released will always be given to them. They can spend this money on whatever they like. However they are unlikely to be able to stop the sale.
Can you keep a Joint Bank Account if you go Bankrupt?
After you go bankrupt any account you have been using will normally be frozen by the bank. The OR can take control of any money in it over and above what you need for reasonable living expenses.
If you have any joint accounts the best way of protecting these is to take your name off before you go bankrupt. This should be a simple process if the account is in credit.
If your joint account is overdraw this debt will be included in your bankruptcy. However because it is in joint names with your partner they will still be liable to repay the overdraft in full.
You are allowed to have a bank account in your own name once you are bankrupt. Normally it is best to open a new account before going through the process. There are a number of basic accounts that you can choose from.
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I have large debts (90 grand) from my failed business, i live with my now partner ( rented room initially) and pay her towards bills,mortgage, etc, the house is in her sole name and has been for 5/6 years. I dont have any joint accounts with her,or debt, my debt is in my own name.
I need to decide if bankruptcy is better than IVA, could the receiver make any claim to the house?
Hi Jason
Given you are living with a partner and not married her property would be safe if you go bankrupt. The only time the property would be at risk is if you had built up a financial interest in it. The way you could have done this is if you have been paying the mortgage on her behalf for a significant period because she had no income. Alternatively if you have paid for material improvements to the property (such as a new conservatory).
As long as you have not done any of these things you would not need to worry if you go bankrupt. Given this and the fact you have nothing else to lose, a 5-6 year IVA would give you no benefit over going down the bankruptcy route. You would be worse off financially in an IVA and your credit rating will be affected in exactly the same way.
By the way, just paying rent to her does not constitute building up a financial interest. If this was the case then every lodger could claim they have built up an interest in their landlord’s property by simply being there. That is clearly not the case.
Hi few questions,
1st can the official receiver look into my wife’s bank account?
2nd I gave away 5k to family before going bankrupt didn’t know I couldn’t or said something about extending bankruptcy if this happens will I have to pay the 5k back and what happens if I don’t name who I gave money too
many thanks
Hi Hugh
If you go bankrupt the official receiver has no authority to look at your wife’s bank account. They can’t ask her for copies of her bank statements. That said they are required to do a thorough review of your situation. As such if they believe you have given her assets or put your funds in her account in order to try to hide them from your bankruptcy they can ask you to prove otherwise. In this situation you might want to offer up her statements to show this is not the case.
Giving away cash to a family member or other 3rd party within 5 years of going bankrupt is known as a transaction at undervalue. If you have done this (knowing or unknowingly) it is possible that the official receiver will demand you provide contact details for these people so they can write to them and demand the return of the funds. That said this is only likely to happen if the transaction happens just before you go bankrupt. If you give £5k to family 1 month before going bankrupt the OR will certainly want it returned. If you did it 4 years ago they are more likely to ignore it.
You are under a legal obligation to co-operate with the OR. As such if you refuse to give contact details when asked they could suspend your discharge until you comply. In other words you will remain bankrupt until you provide the information they have asked for.
Thank you for the reply so if i refuse to let the official reciever look at my wife’s current account all they can do is not discharge my bankruptcy?
Hi Hugh,
The OR is unlikely to demand to look at your wife’s bank account. If they suspect you have transferred funds to her to hide them they will simply ask you for information to prove otherwise. If you can’t or wont do this they may then say you are being un-cooperative and as a result they can apply to the court to suspend your discharge. You may or may not be concerned about this.
Perhaps more concerning is if the OR is confident funds have been transferred to your wife, they might also decide to take legal action against her to collect these. The ball will then be in her court to pay or prove she did not receive them from you…..