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 currently have around 30000 worth of debt. I’m married and have been for 2 years. I live with my husband and our 2 children. My husband owns our home, he went bankrupt in 2011 and the mortgage is now a interest only mortgage. My husband gave up work just under 2 years ago to care for our children as childcare is so expensive. I pay all the bills including the mortgage interest only payment.
Our house is valued at 102,000 with around 99000 left on mortgage. If I was to go bankrupt do you think they would look at taking my husbands house? I understand fully that as I’m paying the mortgage that they could see that I have an interest in the house.
Hi Kerry
Given you are married and you have been paying the mortgage for the past 2 years I think the official receiver will conclude that you do have an interest in this property. I would think their starting point would be you have a 50% interest in any equity.
That said if the value is £102k and the mortgage is £99k then the total equity is no more than £3000. In this situation the house itself is not at risk as long as you keep paying the mortgage (which you will be allowed to do as part of your reasonable living expenses). However you will need to buy back your interest from the OR. You interest is calculated as the value of your 50% share of the equity. In other words a third party will need to pay £1500 based on the current valuation.
You do not have to do this immediately. However the longer you leave it the more likely it is you would have to pay more. If the value of that house prices go up your 50% share of the equity will be worth more. As such the amount required to buy back your interest will be that much higher.
Hi there, I am very seriously considering bankruptcy – as have around £24k of unsecured debt that has built up over the years and is now leaving me with very little disposable income. I have been married for 8 years but the house is in my husbands name, as he has owned the property for the last 18 years. Would the OR try and make a claim on the house, I did not pay any deposit to it and he pays the mortgage? This is the only thing that is stopping me really going bankrupt. Thanks
Hi Kath
This situation is complicated. On the face of it because you did not pay the deposit and have not paid the mortgage it would seem that you have no interest in your husband’s property. However the fact you are married means that you probably do have an interest.
Before making any decision about bankruptcy I suggest you speak to a family lawyer. Ask them what claim you would have on the property if you were to get divorced (hypothetically of course). Insolvency Law normally follows family law in these matters. If a family lawyer thinks you would have a claim then the Official Receiver will probably think so too.
In that case you might want to avoid bankruptcy and use a different solution – perhaps an IVA.
I am 17 month into bankruptcy. I’ve got a boyfriend and were in talks about moving in together he has got a lot of savings would the bankruptcy (A.I.B) take his savings into account and need to pay it. The debt is in my name and my ex partners name due to us splitting up and he continued to live in the house and didn’t pay the mortgage. The mortgage company tracked me down 6 years later.
Hi Deborah
Given you mention the AiB I assume you are living in Scotland…. Whether in Scotland or England/Wales a third party is not responsible for your debts. If you move in with your boyfriend any savings or assets he owns are not at risk. He would not have to pay these to the AiB