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 seem to have a bit of a grey area in my bankruptcy that the OR is also struggling to get me an answer. I took out my mortgage in june 2007 in my sole name as I was currently single so had the mortgage in my sole name. I married in Feb 2009 but never moved the mortgage to joint names
Fast forward to now and I have gone bankrupt and stated on my application that my wife has a 50% interest in the house as she has paid towards the mortgage and upkeep since we married but is not named on the mortgage
I cant seem to get an answer from the OR if they will consider her as 50% owner although not on the mortgage
Hi Ian
Unfortunately this is not a straight forward situation. It is understandable that you want the OR to recognise that your wife has an interest in your property to protect half of the equity. Given you bought the property before you were married and your wife is not on the deeds the starting position taken by the OR is that she has no interest. However I do not believe this is the case.
In my opinion your wife certainly has a claim on some of the equity in the property. This is firstly based on the fact that you are married and have been so for more than 5 years. Given this in a divorce situation the Court will assume that she is entitled to a share of your assets. If you have children together her claim will be even stronger. The same rights should be considered in a situation where you become insolvent. As an aside the same rights would not exist if you were not married but just living together as partners.
In addition if she has paid directly towards the mortgage or paid for specific improvements then a Trust will have developed meaning that she has developed an interest to the value of the funds she has put in.
The question is always going to be how much of the equity can your wife reasonably claim. Unfortunately there is no rule book here. In divorce more often than not it would be down to the court to decide. However make no mistake she would be awarded something. I believe the Official Receiver must take this into account and therefore it would be wrong for them to state she has no interest.
To try and get a better view of what the split might be (and of course depending on the amounts involved) you might want to discuss this with a family solicitor. I am pretty sure that the OR would accept that outcome as the way the split should be handled in your bankruptcy.
Hi
I am considering bankruptcy. My partner and I were equal shareholders in a LTD company. I have recently resigned from the company and have been taken off the joint account.
But on the bankruptcy form it asks for details of all accounts I’ve had in the last 12 months. So I have to declare it.
Will the account be frozen once I’m declared bankrupt? Even though I’m no longer on the account and no longer a director of the company?
Thank
Hi John
You do not have to declare a limited company bank account on your application form. You only need to list accounts you have had personally in your name. The limited company account is not in your name. It is in the name of the limited company.
That said you will have to declare that you were a director of this company in the last 12 months. Even though you have resigned as a director you still own 50% of the shares which are an asset. The official receiver will be interested to understand whether these shares have a value.
If the business was simply a service company with no “sale value” there is little to be concerned about. However if there is value in the business (which would be listed in the company accounts) then the Official Receiver will need to realise this value by selling your shares.
I would suggest you get more advice on this before submitting your application. Please contact us at Beat My Debt and we would be happy to help (0800 077 6180).
Hi,
My husband has outstanding debts from 5 years ago, around 30,000 that is now catching up with him. We live in a house that was left in my mums wills, that I own with my brother and sister.
If he went bankrupt would the house come into it and would it affect me ever getting a mortagage on this house?
Thanks
Hi Jess
This is not straight forward. The question is does your husband have a financial interest in the property. On the face of it if he did not help you pay for it and there is no mortgage that he has contributed towards and he has not paid for any material improvements then he would have no interest. In that case if he goes bankrupt the property would not be at risk.
However the issue is you are married. As such you need to consider the position if you were to separate and go through a divorce. If that were the case would your husband have any claim on the property? This may depend on how long you have been married and how long you have lived in the property together. If in a divorce he does have a claim on the property then that would also be pursued if he went bankrupt.
We are not solicitors here. Before he decides to go bankrupt I strongly suggest you get advice from a family lawyer as to what his rights would be in the hypothetical scenario that you got divorced. If they say he would have no right to any of the house and can give you that commitment of that in writing then bankruptcy might be considered. However if there is any doubt at all I would strongly advise avoiding bankruptcy and using an IVA.