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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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26 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.

  6. Anna says:

    I’m considering going bankrupt. My husband is working and we receive some benefits, I am unable to work at the moment. As I have no actual income and everything goes through my husband’s account, how would the restrictions on day to day spending affect us?

    We use and he pays for our vehicle but the loan for it was taken out by a family member, they are still the registered keeper. I assume the OR wouldn’t be able to take that from us? Would they be able to stop him making the monthly payments to the family member to cover the loan costs if it’s just me going bankrupt?

    1. Hi Anna

      If you go bankrupt even though you are not working you will still have to list all the forms of your household income on your application (including your husband’s wage and any benefits income you both receive). You also give your total household expenses in the expenditure budget.

      If when you deduct the total expenses from the total income there is zero household surplus income (which I expect would be the case) then you will not be asked to make any payments towards your debts. If there is a surplus then only your share of this would be payable to the OR. For example if your benefits equate to 10% of the total income then only 10% of the surplus is yours and is payable.

      If your husband is paying for a the car from his income then even though it is not registered to him this is a legitimate household expense. The Official Receiver will not stop him making the payments.

  7. Tracy says:

    Hi James. I am considering bankruptcy and my husband is really worried about the house. The mortgage is in his sole name and he pays all the household bills. I had my own business that unfortunately didn’t work, so not working. I paid my own bills. Now i am not working and I am so worried that the house will be taken into the bankruptcy?

    I cannot seem to find the answer before i submit my application. i pay for nothing in the house at all but yet they want his income details!! Please help before I go mad!! Thank you

    1. Hi Tracy

      Whether or not the house is at risk depends on whether you have a financial interest in it. If you do the value of this would have to be realised. If the mortgage is not in your name then working out what this might be is not straight forward. There are a number of things which would indicate you do have an interest.

      First who paid the deposit. If some of the money came from you or it came from the sale of a previous property in joint names then you almost certainly have an interest. Secondly how long have you been married and do you have children together. If you have been married a long time and have children then there is a strong chance you have built up an interest in the property.

      As I said this is a complex area so before going bankrupt I strongly recommend you speak to an expert about it. If you would like to contact me please call 0800 044 3194.

      In terms of your husband’s income yes you do need to include this info. The Official Receiver needs to review the full household income and expenses figures. They use these to determine whether there is any surplus income. Your share would have to be paid towards your debts. However if you have no income no need to worry. Your husband does not have to pay on your behalf.

  8. Aimee says:

    Good afternoon, my partner is about to move in with me and my two children, (we have one together but haven’t been living together), I work and am on benefits, he is just about to start a new job after being off sick for two year after an injury at work.

    My question is I have looked into bankruptcy and this is the best option for me but when he moves in he has his own things to pay for like car and insurance and fines so he wont be left with much money after this is all paid so how will his income affect my bankruptcy? And secondly, he is awaiting a personal injury compensation claim which hes looking at around £30,000, will they want to take this from him to pay my debt?

    Any help and advice would be appreciated, thank you.

    1. Hi Aimee

      If your partner moves in with you the official receiver would expect him to pay his fair share of the household living expenses. As such they will normally need you to give information abut the household income and living expenses.

      If there is no overall surplus you will not have to make any ongoing payments towards your debts. If there is a surplus it would be split between you. He would keep his share and yours would have to be paid towards your debts.

      In terms of his personal injury claim you do not have to worry about that. He will not have to use any of it to pay your debts. He will be able to keep it all even if you are bankrupt.

  9. Zoe says:

    Hi

    Will my PIP be included in my husbands bankruptcy. I realise both our income & expenditure has to be declared but don’t see why my PIP has to be taken into account as they are his debts not mine. Will I be made to pay my excess disposable money for his debts?

    1. Hi Zoe

      You do not have to be concerned about your PIP. This cannot be taken into account by the official receiver when calculating surplus income. You will not have to pay any of this income towards your husband’s debt.

      As you have pointed out you should include the amount you receive as part of your income however you balance this out by adding the exact same amount of expenditure on a specific line in the “other expenses” section of the expenses in the application form. Simply call it “Wife’s PIP Expenditure”.

  10. Sarah says:

    My boyfriend is thinking of going bankrupt.. He has just moved into my house that a own and pay a mortgage on. He hasn’t given me any money towards bills as he hasn’t been paid as he business is so quiet. His name is not on any of the bills or mortgage. Will i be affected if he does go bankrupt?

    1. Hi Sarah

      You do not have to worry about your house. If your partner has only recently moved in and has not paid for any material improvement to the property or made direct payments to the mortgage he clearly has no interest in it. If he goes bankrupt it will not be at risk.

  11. Lynn says:

    Hi. I’m considering bankruptcy. My husband and I both own cars required for work commutes.. Mine is low value of about 1000. His is about 3500. I wondered whether my partners car would have to be declared or would be affected by my bankruptcy. Thank you

    1. Hi Lynn

      If you were to go bankrupt you do not need to worry about your husband’s car. Given he paid for the car it is not your asset. As such it does not form part of your bankruptcy estate and it would not be at risk.

      It is likely you would have to declare his car expenses in your income and expenses budget. However it would not be at risk.

  12. Livvy says:

    Hi,

    It is likely that my husband may have to file for bankruptcy as a result of the HMRC loan charge. We received the figure that they are seeking and it will be impossible for him to pay that back (even with an instalment plan as he has other debts and the amount they say he owes is over 200k). The house is in my name (bought before we met) and we have a pre nup (married 2016) separating our finances and ensuring no interest in the house without an amendment to the pre nup (we did this as I had substantial equity/savings and he had debts). We have no children. He does pay a monthly lump sum towards ‘rent’ and expenses inc food but is not on the mortgage.

    My question is whether the house is safe if he declares bankcruptcy and whether we can ensure that all liability to HMRC would be included such that we have a clean slate after a year (even the ‘closed’ years where there is an option but not a requirement to pay income tax for the loan charge). And also whether there may be other disadvantages I’ve not thought of apart from the usual restrictions that bankruptcy implies. Thank you so much in advance. Livvy.

    1. Hi Livvy

      This is not an easy one to answer. On the face of it given you bought the house, paid the deposit and have always paid the mortgage he should have no interest. However if he goes bankrupt the official receiver will still need to consider it. They may try to argue he has an interest based on the fact you are married.

      My suggestion is before he does anything you should go an take advice from a family lawyer (perhaps the same one that helped you with the pre nup). The question you need to ask is if you and your husband split and there were divorce proceedings would he be entitle to any part of the house.

      Generally speaking insolvency follows the same rules as family law in these matters. As such if a family lawyer says there is no way he has an interest get this in writing so you can show it to the official receiver. It is then very unlikely they would take further action. However if your solicitor says there is a possibility he might be entitled to something then the OR is likely to have a case.

      In that situation it might be worth your husband considering an IVA first of all as this would protect the house if it can be done. Alternatively he could go ahead with the bankruptcy but be prepared for the fact that he may have some interest in the house and so some money would need to be handed over in lieu of this.

  13. Ivan says:

    Hi, if I declare bankruptcy, will my wife (no joint debts) be able to take out a car loan (she has good rating). We have no assets?

    1. Hi Ivan

      If you go bankrupt your partner’s credit rating will not be affected. As such she will still be able to get credit such as a car loan if she meets the lender’s criteria.

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