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My Partner and Bankruptcy
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My Partner and Bankruptcy

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.

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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 as a third party they are not 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 proportionally based on the amounts you each contribute to the income. Your share will have to be paid towards your debts each month.

The only way to avoid having to declare your partner’s income is if you can successfully argue you are just a lodger in their property.

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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10 thoughts on “My Partner and Bankruptcy

  1. Jen says:

    I am going bankrupt. I live with partner and our son. The house is in his name anyway and debt is mine. We are not involved and I stay in another room. He doesn’t want to get involved or me give his name on application.

    He does have income. I pay him every month a portion towards bills and he pays larger proportion of bills. Do I have to give his name on application? Or only income?

    1. Hi Jen

      If you are no longer in a relationship with your ex the best way to describe your situation as simply lodging in his property. As such you can record the total amount you pay him each month as rent or “lodgings” on your application form.

      You do not treat him as a member of your household and as such do not need to give his name or any details of his income on your application.

  2. Rey says:

    Hi

    I’m looking at going bankrupt. My partner recently got a car on finance. She didn’t have enough income to get finance so we did a joint application to show we could afford it- we got accepted. The payments come from her account, the car is registered to her, insured by her and I’m a named driver. I don’t yet see anything on my credit file about the finance. I just want to know can she keep the car if I claim bankruptcy – we aren’t married. Thanks

    1. Hi Rey

      From what you have said I am not 100% sure if the finance agreement is in joint names between you and your partner or just her name. If it is just in her name there should be no problem. You can go bankrupt and it will not affect the agreement. As long as the payments are maintained your partner can keep the car.

      If the agreement is in joint names it could be more of a issue. You say that the finance does not show on your credit file so this suggests it is not a joint agreement. However if it is you must speak to the finance company before you go bankrupt and ask them what would happen if you go bankrupt. Most have no problem as long as the payments are maintained. However some will automatically cancel the agreement and want the return of the car.

      You need to know how they will react before you make your decision. If you do not tell them it is likely they will find out anyway so better to be safe than sorry.

      If your name is on the agreement and the finance company have no issue then again it should not be a problem to keep the car as long as the monthly repayments are affordable and maintained once you are bankrupt.

  3. kj says:

    Im considering bankruptcy as it seems the better option (currently in a DMP) which is dragging on and stopping my families life from moving forward – my opinion is why should they be penalised for my actions.

    My query is I’ve been married for 7 years and living in my husbands home since then, we have a child – the house was bought by him, before we got together. He put the deposit down , he pays the mortgage and household bills. Would the bankruptcy try and take the home. Or would it just be my personal finances they would consider

    1. Hi kj

      From what you have said I would be confident that you do not have any financial interest in your husband’s property. As such if you go ahead with bankruptcy it should not be at risk. Having said that I would advise that you call us to have a chat about this before you make the final decision to go ahead (0800 044 3194).

      In terms of the household finances you would have to declare both you and your husband’s income and the household living expenses in your application. However he will not be required to pay your debts. Only your share of any household disposable income will have to be paid to the Official Receiver.

  4. S P says:

    Hi James, I am about to go bankrupt. My ex partner lives with me and our children. he recently had a large sum of money go into his account and is concerned he will need to a)explain it b) use it to contribute to my debt. is this the case? he would move out if he needed to we live together for our young children

    1. Hi SP

      If you go bankrupt your partner is not liable to pay your debts. As such if the money he is receiving is nothing to do with you then you have nothing to worry about. He will not have to explain it or use it to pay your debt. In fact it is not even likely to come up as your partner will not have to give any details about his bank account or supply his bank statements.

      The only time it would be a problem is if you have some kind of interest in the money. For example it was the proceeds of the sale of jointly owned property. But given this is not the case you have no need to be concerned.

  5. Amanda says:

    My partner has filed for bankruptcy and after researching it I didn’t think it would affect my income… everything seems to say a partner won’t be liable. However we had the call with OR today who said they would look at household income and a portion … which means definitely using my income as he is on a low wage.

    My partner and I only started living together 6 months ago, and all the debts are from way back before I met him. We don’t have a joint bank account, and other than sharing bill costs and rent (which I pay 2/3 and he pays 1/3) , our finances are completely separate, we I haven’t been together that long so joining finances wasn’t in the cards unless we married.

    I’m am so upset as this is the first time I’ve been on my feet financially, an trying to save for a house deposit and I absolutely refuse to pay anything to his old debtors. The OR asked me questions at the interview about my surplus income and what it was spent on which I found really really distressing.

    Is this something you’ve had experience of? They are sending expenditure forms our. I intend to appeal any decision they make that involves my income in excess of what i currently contribute to the household as we don’t ‘share out’ any disposable income.

    Thank you

    1. Hi Amanda

      I can assure you that you will never have to pay towards your partner’s debts. However where you and your partner share the rent and bills (as apposed to him simply living with you as a lodger) then the Official Receiver is required to do a household income and expenses budget. As such you need to give details of both your incomes and include both your living expenses in the expenses budget.

      The OR is then able to calculate a household surplus if indeed there is any. If not then no payments will be required at all. If there is it is split between you and him. You will be able to keep your share and he will have to pay his to the OR. The split is done proportionally to your contribution of the income. So if you earn 2/3 of the income and he earns 1/3 then this is how any surplus will be split.

      The only way around this is to state to the OR that your partner is actually living with you as a lodger. As such the bills would not be split but instead he simply pays you a fixed amount each month for lodgings (£80-£100/week is generally acceptable). He then can argue his income and expenses are entirely separate from yours and you would not have to be involved in any way.

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