My Partner and Bankruptcy
If you are thinking about going bankrupt one of your concerns may be how your Partner or Spouse will be affected. Your Bankruptcy will not directly involve them. In fact there is no legal requirement for you to even tell them. However they may still be affected. This is especially the case if you have joint debts or own a property in joint names.
- Find out how your Partner will be affected if you go Bankrupt
- Do you even have to tell your partner if you go Bankrupt?
- What if you have joint debts or own a house in joint names?
- Will your Partner’s credit rating also become poor?
Will your Partner be told if you go Bankrupt?
Your partner will not be told about your Bankruptcy. You go bankrupt as an individual person. No one else is included in the process. As such depending on your circumstances it is possible to do it without them ever finding out.
However you may have shared financial responsibilities with your partner. Perhaps you have joint debts or own a joint property. If so it is likely that they will be affected. In these circumstances you will almost certainly have to tell them.
BE Tip: If you live with your partner you will have to give details of their income in your application form. This does not mean that they are included in the process in any way. However the Official Receiver needs to understand if they are able to contribute to the household living expenses and if so by how much.
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What happens in Bankruptcy if you and your Partner have a Joint Property?
The implications of bankruptcy have to be considered very carefully if you are a home owner. Your share of any equity in the property will normally have to be realised by the Official Receiver (OR). This is then used to help pay your debts.
The OR is likely to write to your mortgage lender and any other joint owner to confirm they now own your interest in the property. As such if your property is in joint names you will have to tell the other joint owner if you go bankrupt.
Your property may not automatically be at risk. It may be possible for your partner or someone else to buy your share of the equity. However if no-one is able to raise the money to do this then the property may have to be sold. The OR can force a sale even if your partner does not agree to it. Their share of any equity raised will be given to them to do with as they wish.
What will happen to your Partner’s belongings?
Generally speaking personal belongings are not at risk in bankruptcy. You will be allowed to keep all your reasonable household items including your laptop and ipad. In addition your partner does not have to worry about anything they own. Their belongings cannot be touched if you go bankrupt even if they are particularly valuable.
Unless you own extremely valuable items such as antiques the only possession that may be at risk if you go bankrupt other than your home is your car. If your car is worth more than £1000 you may have to sell it and get a cheaper one.
If your partner owns a car this is not at risk. It is their asset and therefore cannot be claimed by the Official Receiver. You are allowed to drive their car and also contribute towards the running costs while you are bankrupt.
What happens to your Partner’s debt if you go Bankrupt?
If you go bankrupt only unsecured debts in your name are included. If your partner has debts in their name these are not included and still have to be paid. This might cause a problem if they do not have enough income to pay these themselves. You will no longer be able to help them pay their debts out of your money if you have been used to doing this.
There can be a more significant issue if you have any debts in joint names with your partner. Your bankruptcy will protect you from these but not them. They are still liable to pay 100% of the outstanding balance of these debts. If they cannot afford to do this from their own income they may have to consider starting a debt solution themselves.
BE Tip: You cannot pick and choose which debts you include in your bankruptcy. Any unsecured debts in your name are automatically included whether they are in joint names or not. As such if you have joint debts with your partner you will almost certainly have to discuss how they will continue to pay these before you go ahead.
If you go Bankrupt will your Partner’s Credit Rating be affected?
Clearly if you go bankrupt your Credit Rating will become poor. However your partner’s is not affected. Credit ratings are unique to an individual not a couple or household. As long as they have no problems with repaying any debt in their name your partner will continue to have a good credit rating. They will still be able to apply for new credit if they wish.
Having said that it is possible that your partner may experience some credit difficulties. This can happen particularly if you are living at the same address. It is possible for bad records from your credit file to become associated with their’s by mistake.
Your partner can avoid this by getting a copy of their credit file after you are bankrupt. They can then check for any errors. If they find that any of your records are showing on their file they can ask the credit agencies to remove these. This process is known as disassociation and will then prevent them having credit issues.
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