My Partner and Bankruptcy
Your partner or spouse may be affected if you go Bankrupt. You need to understand the implications particularly if you have jointly owned property or joint debts.
- Does your partner have to pay your debt?
- What happens to jointly owned property?
- Is their credit rating affected?
- What happens to your partner’s debts?
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Does your partner have to pay your debt if you go Bankrupt?
If you go bankrupt your partner will not have to pay your debts. Legally speaking no third party is liable to pay debt that is just in your name even if you are married.
Despite this you do have to include details of their income on your application form. This is the case whether they are working, receive benefits income or a combination of both.
The reason is the Official Receiver must ensure they pay their fair share towards the household expenditures. As such a household surplus income has to be calculated. This is then shared between you both. Your share will have to be paid towards your debts each month.
Your partner can keep their share of any household surplus income. Any payments you have to make are based on your share alone.
What happens to Jointly Owned Property if you go Bankrupt?
Your partner’s share of any equity in a jointly owned property is protected if you go bankrupt. However yours is still transferred to the Official Receiver (OR) and has to be realised to help pay your creditors.
Your partner can buy back your share from the OR. If there is no equity in the property this can be done for a nominal sum plus solicitors costs. However where it is worth more an amount similar to the value of your share will have to be paid.
If neither of you are unable to raise the money to buy back your share of the equity after 3 years action could be taken to force a sale. If this happened your partner would be given their share of any equity released. Your share would be retained by the OR.
The Official Receiver does not want to force the sale of a jointly owned property. It would only happen if there is significant equity and your share cannot be released any other way.
Is your Partner’s Credit Rating affected if you go Bankrupt?
Your credit rating will become poor if you go bankrupt. However the rating of your partner or anyone else living at your property will not be affected.
The record that you are bankrupt does not show up on anyone else’s file. This is the case even if you and your partner are married. As such they can continue to apply for new credit if they wish.
Having said that the credit records of two people living at the same address can be mixed up. As such after you go bankrupt it is sensible for other adults living at the property to get a copy of their credit file to ensure no mistakes have been made.
What happens to your Partner’s Debts if you go Bankrupt?
Only unsecured debts in your name can be included if you go bankrupt. Debts in your partner’s name are not included and still have to be paid.
This will be a problem if they cannot afford to pay their own debts from their share of the household surplus income. You will no longer be able to help them pay from money you receive.
There may also be an issue if you have debts in joint names. You will no longer have to pay these after you go bankrupt. However your partner must maintain the payment as they remain liable to pay 100% of the outstanding balance.
If your partner cannot afford to pay debts in their name or joint debts from their own income they may have to consider using a debt solution themselves.
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