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 there,
My husband is self employed , I don’t work I receive tax credits and child benefits which I greatly depend on for my two children . Between me and my husband we have Debts of just over 20k his debts are around £9000 and our joint debts are £5000 and my debts are around £6000 . He is massively under pressure to pay everything and he is feeling like this is the only route to go down.
But I don’t want to go bankrupt as I feel like I would loose my tax credits bank accounts etc. The question is if he goes bankrupt alone how will this affect my tax credits bank accounts etc as I said I massively depend on these for my children also would this affect my husband’s self employed job?
We have just recently moved into my parents home so don’t own our own home car etc.
Hi Louise
If your husband or indeed both of you go bankrupt you do not need to worry about your bank account. If only your husband goes bankrupt then your bank account will not be affected in any way (he can also have an account – see below). If you decide to go bankrupt as well to deal with your debts then you can also have a bank account. You will be able to use it to continue receiving your tax credits. You don’t need to worry about that.
The type of bank account you can have when you are bankrupt is called a basic account. Most banks now offer these. If you owe money to your bank and/or if your account is a current account you will have to open a new basic one. It is easy to do because most banks now offer these.
In terms of your husband’s job this would not be affected. If he goes bankrupt he can continue working as a self employed person with no problem.
I note that individually your debts are less than £20,000. Given you have no assets I therefore suggest you both consider a Debt Relief Order (DRO) rather than bankruptcy. This gives the same outcome but if you qualify (which it sounds like you would) then the cost of the process is just £90 per person rather than £680 for bankruptcy. This option might be better for you both. The comments above re bank accounts and self employed work also apply for a DRO.
Hi, a relative has asked me to look into PPI for his wife.
He was declared bankrupt 16 years ago, she was not affected.
He thinks he has/had no PPI and any claim would not be his anyway.
If (big IF!) she is successful in her PPI claim:
1. Would she be entitled to it, or would it go to OR?
2. Could it in any way negatively affect them (i.e. could the OR enforce payment or take any retrospective or current action against him/her/both?)
They are both very nervous about putting themselves in a negative situation as they have managed to get themselves into a good place in the last few years!
Thanks in advance
Hi Peter F
If the wife of your relative had debts in her name that were not included in her husband’s Bankruptcy then she can claim for PPI against these. If she is awarded compensation it will be 100% hers to keep.
If you are talking about joint debts which were included in the bankruptcy then again she could still claim. However of course only 50% of any compensation would be paid to her. The other 50% would have to go to the Official Receiver.
If she gets a windfall like this (or any other windfall for example an inheritance payment) it will not negatively affect them in any way. The official Receiver has no right to, or claim upon, any windfalls that a non bankrupt receives whether they are married to a bankrupt person or not.
By the way if he is now discharged and receives a windfall which is not a result of something that happened before he went bankrupt or while he was bankrupt it would also be his to keep.
Hi, my wife has her own company which I have nothing to do with and is on the brink of bankruptcy. I have my own job and we have no joint debts and we rent a house. What impact would my wife’s bankruptcy have on me financially? I have PCP agreements and a loan but having read some of your comments, would I be right in thinking I would most likely be worse off as a result because my income would need to be declared and the OR can have a slice of my wages leaving me less money to cover my own bills?
Hi Mark
If your wife goes bankrupt this should have no impact on you whatsoever. You can continue paying your car finance agreement and loan. Your credit rating will not be affected.
The only thing to be aware of as you say is the income and expenses calculation. The OR will need to do a household income and expenses budget. This will need to include the total household income and expenses. The household surplus is then split based on the proportion of the income you both generate. This process ensures both parties are contributing their fair share towards the household living expenses.
A problem can occur if the party who is going bankrupt has been subsidising the other’s debt payments. This is not allowed to carry on if they go bankrupt and can leave the non bankrupt party with debts they cannot afford. However in your situation this would seem unlikely. If your wife’s business is going to stop and she has no income then the OR cannot take anything from her. They are not allowed to ask you to pay towards her debt.