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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Hi I am looking into bankrupcy, I however I am living with my wife in her house which she owns. I pay half the bills for the last year and 7 month what would happen to her house if I was to go bankrupt?
Hi Keith
If the property is in your wife’s name and she paid for the deposit then if you have only been contributing to the bills for 18 months I do not think there will be any risk. I do not think the OR could argue that you have any beneficial interest. However this can be a complex area so if you would like to chat it through please do give us a call (0800 077 6180)
Hi
I was made bankrupt in January 2018, I am looking into marrying my partner and we will live in a rented house. Could you please let me know how this could affect the bankruptcy, ie. Would it affect his wages or the monthly payments which I repay.
Many thanks
Hi Nicola
This is a very good question. I assume you are not living with your partner at the moment? If you get married he will not become liable for paying your debt in any way. However if you move in together (whether you get married or not) you will have to notify the Official Receiver. They will then need to review your new household income and expenses budget.
To do this the OR will need information about your partner / husband’s income and all the household living expenses. They use this to work out the household surplus income. This is then split between you and your partner. Your partner will be allowed to keep their share. Your share has to be paid to the OR. If this is higher or lower than the amount your are currently paying your IPA will be changed accordingly.
I was declared bankrupt on 2nd August 2018. I’ve yet to do an IPA as i’ve changed jobs and the OR is going to send them through any day now so its accurate with what my expenditure is. The question i’ve got is apparently I have to do a joint expenditure with my wife. She has around £600 a month to pay off in loans. Can i take this off the amount I declare as her take home pay, or is there an option to add this on as an expense when submitting the IPA? I’m worried she’ll be out of pocket if they don’t allow for this and they expect for her to pay this out of her left over disposable money after expenses which will mean we both have no money!
Hi Patrick
This is a very good question and is very important to understand (ideally before making the decision to go bankrupt).
When you complete your income and expenses budget for the Official Receiver (OR) you must declare all income of the household. This includes the total amount of income your wife receives (there is a section on the IPOQ form you will be asked to complete for you to identify this). You also include all the household expenses including housekeeping for the both of you and any expenses she has for things like running her car and any pension or health insurance she pays. However (and this is very important) you cannot include her debt payments in this expenses budget.
Once the income and expenses budget is complete the OR will use this info to calculate the household disposable income. However they will then split this figure between you. The split is pro rata based on the level of contribution to the household income you both make. In other words if your contribution to the income is 60% of the total and your wife’s in 40% then 60% of the disposable income is deemed yours and 40% your wife’s. The OR can then only request you pay your 60% towards your debts.
Your wife is allowed to keep her share of the disposable income to do whatever she likes with. Of course if she has her own debts to pay she can use her share to maintain those payments. The only time this becomes an issue is if her share of the disposable income is not sufficient to maintain her debt payments. In that situation she will have to start a debt management solution of her own. You are not allowed to give her any of your share of the disposable income to help her pay her debts.