My Partner and Bankruptcy
- 29 Jun 2022
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.
Included in this article:
- 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?
Rather speak to a person? Call 0800 044 3194 or click here to complete the form below and we’ll call you
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 Official Receiver needs this information to ensure each party is paying their fair share towards the household expenditures.
They will look at any household surplus income. This is will be shared between you both proportionally based on the amounts you each contribute. Your share will have to be paid towards your debts each month.
One way you may be able to avoid having to declare your partner’s income, is if you can 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.
Worried about how your partner will be affected if you go bankrupt? Give us a call for advice (0800 044 3194) or complete the form below.
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?
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.
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
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.
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
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.