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 separated from my ex wife. She lives with her parents and left me with the house which is in major negative equity. She stopped paying the mortgage (it is a joint mortgage). I have been fighting for custody of our child which has left me with over 15.5k in debt. If I go bankrupt would this affect my contact order with my child? I have no way to pay the fees.
Hi Stefano
We are not solicitor’s here. As such I am unable to say whether going bankrupt would affect your contact order or not. I would guess that it would not but to be sure you will need to get advice from the solicitor who helped you with the contact order. Alternatively your local CAB (Citizens Advice) might be able to help.
In terms of the property are you able to afford the mortgage? If not and it is repossessed then bankruptcy would certainly help. Both the £15k of debt you own now AND any shortfall on the mortgage after it is sold would be included and written off.
Remember if you go bankrupt it will protect you from any mortgage shortfall. However it will not protect your ex wife. She would still be liable to pay this debt.
Hello,
My ex partner declared bankruptcy in 2015. we have a joint property which he has continued to pay but not lived in the property for the last 8 years. The house needs extensive renovations and is worth £80000 with a mortgage of £73,000. He has continued to pay the mortgage and myself make a minimal payment.
I asked that the house be sold in June, my ex partner has a buyer for the property. However, he has continued to look for a mortgage, which he was unable to get due to his bankruptcy. I agreed alongside the insolvency company to sell the house. But now he is telling me the official receiver will not sell the house now. Their is not a huge amount of profit and 50 Percent will go to the official receiver.
My ex partner is now saying he is just going to give the bank the keys to the house, he’s said the bank has said they will close the mortgage with nothing to pay if I give consent for the house to be signed over to them, which I can’t believe is true as surly this will start the repossession process, which I do not want to happen. I have an appointment with the bank this week.
I have applied to court for a Forse of sale, but rather than going down this route I would prefer to sell the house. The official receiver told my expartner they will not sell the property unless the £8000 owed to them is paid, which he can’t afford. I would have thought the official receiver would rather sell the property take his share of around £3000 towards what he owes. I am going to speak to the insolvency agency tomorrow to confirm what he is saying is right. I can’t afford the mortgage or a solicitor, as I’m a single parent and on a low income, so this is an extremely difficult time. I need much needed advice
Hi Mary
From what you have said I am not 100% clear on your situation. I think I understand correctly that you live in this property but your ex does not? I understand the joint equity is about £7000 (if the house sells at £80k with an outstanding mortgage of £73k). Given it is joint £3500 of this equity would be yours and £3500 would be your ex’s. As he is bankrupt his share would go to the OR.
I am not a conveyancing solicitor. However as far as I am aware the only way the house can be sold without a court order is if both you and your ex give your consent and sign the necessary forms. If you are both in agreement that the house should be sold and he does not live there I cannot understand why he would not agree. If you both consent then I do not believe that his Official Receiver would block the sale. It would simply not be in their interest.
Because the house is jointly owned the mortgage lender cannot repossess as long as the mortgage is being paid. As such as long as one of you continues to pay the mortgage no repossession can happen. If you are living there and continue to pay there should not be any risk. I do not believe the OR would force the sale given the amount of equity is so low. As such they may decide to simply put a charge on the property for his share of the current equity and leave it at that.
**Important** If neither of you pay the mortgage then the bank will repossess. They will then likely sell the house in an auction and it is highly likely that they will get less than the market value. If this happens it is very likely there will be a shortfall. You will both be jointly liable for this. Make no mistake the bank will NEVER agree that you have nothing to pay if you give consent for the repossession. If there is a shortfall after the sale it is 100% certain that they will chase you for that debt. Unfortunately for you your husband would be protected by his bankruptcy. As such the mortgage lender will only be able to chase you. They would demand that you paid 100% of any shortfall.
My husband was made bankrupt today due to an overdrawn directors loan account on a liquidated company. We spent thousands on legal fees defending the case as the figures owing were disputed (and evidence provided) but he still lost and now the costs are even higher!
We jointly own a house with equity and this is the only asset we have. It has been suggested to annul the bankruptcy but not sure how, other than selling the house to pay it off, as we now can’t raise what’s owing any other way. Is it too late now to do this? Can I offer an IVA route instead or will the OR force a sale that they control and pay me what’s left from the equity?
Also my husband is sole director of a Ltd company, will he have to stop trading therefore losing his income?
Hi CStar75. There are a number of points to cover here:
1. Your husband cannot be a director for the year he is bankrupt. The law says he must resign. It is possible to keep the limited company running by appointing someone else to be the director (perhaps yourself). Your husband can then continue to work for the company but as an employee until he is discharged.
2. The house you owe in joint names is at risk. The Official Receiver or Trustee (if one is appointed which is likely) will be obliged to realise his share of the equity in the property to help pay this debts. If he is unable to do this any other way then ultimately the Trustee can apply to the court to force the sale of the property. Generally speaking the court would support this application.
3. If you want you can sell the property. If by doing this you can raise sufficient funds to pay back what your husband owes in full it might be possible to annul the bankruptcy. However you will also have to pay the Trustees fees which are likely to add a further £20k-£30k to the total debt. It would likely be better to sell and simply hand your husband’s share of the equity to the Trustee and then have done with it. After 12 months he will be discharged and can be a director again and you keep your share of the property equity.
4. It would not be possible to apply for an IVA and then annul the bankruptcy unless the IVA offer gives at least as much to the creditors as they are likely to get in Bankruptcy. If the only way to do this would be to sell your house anyway then there is really very little point in considering this option.