Your partner is in no way liable for your debt and as such the only time they could potentially be affected by you going bankrupt is in the instance that you jointly owned an asset of value, such as a property, which the Official Receiver (OR) could have an interest in. Some of the ways your partner may be affected in bankruptcy are described below.
In a bankruptcy debts cannot be passed to someone else, if any of the debts were in joint names, or had a guarantor, then the other person would be pursued for their liability for the debt.
There are circumstances, where your partner will be liable for your debt. For example, if you have arrears on your council tax, then the council will make your partner fully responsible for all the arrears (even if these were included in your bankruptcy). If a debt was owed to the council then they will no longer be able to ask the bankrupt for the money, the bankrupt has no further liability for the council tax debt. However, the council is still owed the money and the debt still exists. At that point, the council will look for anyone else who has liability for the debt and ask them for all of the debt. If there is no one else in the household who has responsibility for paying the council tax then the council will not be able to recover the money from anyone and at some point, they will have to make a decision to write off the debt.
It is also important to note that while your partner is not liable for any of your debts, the bailiff can still seize goods belonging to your partner, as the onus will be on you to prove that the household items belong to your partner and not you. For more information, please read our article on belongings in bankruptcy.
In complex situations, such as debts which are due as a result of a conviction for fraud will survive bankruptcy and will always require paying. The person who owes the money or the bankruptee will not always be able to pay any more than the amount they have available to pay. In which case, your partner will be expected to pay their fair share of the household bills and this will result in a calculation about how much money they have left over to pay the debt.
As far as your bankruptcy goes, your partner’s earnings are not taken into account and the OR does not have a claim over their earnings. Only where the property is jointly owned does it get more complicated (see section below).
However as part of your bankruptcy the OR will be looking to set up an income payment arrangement (IPA), whereby you pay into your bankruptcy for a period of three years (Read more about IPA’s in our article, IPA and bankruptcy). For the purpose of calculating what amount this should be, you will need to supply details of your partner’s income so that the OR can calculate what percentage of the household bills you should be paying and therefore what disposable income you have available.
There is a calculator that you can use on the Insolvency Service website to see how the OR calculates the monthly payments to an Income Payment Arrangement.
In most cases, your partner’s credit rating will not be affected if you go bankrupt. Especially, if there is no financial link between yourself and your partner. This is because your credit rating is personal to you and will only show details of your credit history and any financial associations that may exist. If you check with the credit reference agencies you will be able to see if there are any areas where you are linked to another person’s file, usually, these are joint loans and bank accounts.
On the other hand, if you are applying for some forms of credit the application form may directly ask about other people in the household and their bankruptcy status this could be the case with a mortgage application. For more information, please read our article on what affects your credit ratings.
If you are not on the title deeds and have not established any interest in the property then the OR will have no interest in the property. However, there are circumstances where the OR might be interested in your partner’s property:
Certain exceptions will be allowed, such as it is reasonable for you to pay your share of the household bills, such as Council Tax, Gas, Water, Electricity bills. There also may be a personal expenditure that you have for travel to and from work, clothes, medical expenses etc. In complex cases, the OR could deem that you are liable for a certain percentage of the living costs in the property. In which case you will have a beneficial interest in the property. If this happens your partner will be given the opportunity to buy out your beneficial interest (More information in our article, beneficial interest and bankruptcy).
If your partner is renting then they may need to check their tenancy agreement in case bankruptcy is mentioned anywhere. You might also want to discuss the situation with your landlord to see if this has any impact on your agreement.
The OR will not have an interest in your tenancy. However, it may be that the OR might wish to see the tenancy agreement to help verify what rent payments your partner may or may not contribute, in order to get a full picture of their financial affairs.
If you jointly own a property with your partner who is bankrupt, your partner’s share of the property will be transferred over to the OR. Your share of the property will not be at risk or handed over to the OR.
One option for you is to buy out the equitable share by using your own funds, such as savings or by re-mortgaging the property. You are not under any obligation to supply the OR/trustee with details of how you would fund the purchase of your partners share. If you can not afford to pay the full amount in one go, you can negotiate stage repayments by providing top-level information about your circumstances. In some extreme cases, the OR may force the sale of a property.
If you were to go bankrupt this would not affect your partner’s ability to purchase a property provided they were to do so in their sole name and did not make you a joint owner. For more information, please see our article debt against a property.
If you have established any joint bank accounts with your partner then it’s best to operate separate accounts, as most banks do not operate bank accounts for bankrupts. We suggest that you get your name taken off the joint bank account and be careful about your income and expenditure. Ideally you should start making some lists of incomings and outgoings and of course, get together a list of your debts and bank accounts.
On the other hand, If your partner is using your bank account/s and these are not joint then the only reason the OR will be interested is if this money belongs to the bankruptee in any way. For example, if the bankruptee has been using your account for their wages then this money is available to bankruptcy.
In most cases, bankruptcy will not affect your partner. However, there could be a situation where bankruptcy can impact you in the future but this is usually when you form a link. Examples of this could include:
Should your circumstances change (i.e. you become a stay at home parent or get married) then you would need to contact the OR immediately, as this changes a significant amount in your household with regard to income and living costs.
If you need more help regarding bankruptcy and its impact on your partner, please speak to a debt adviser. Speaking to a debt advisor can help you go through details of your situation and they can look at your financial statement to identify other options or at least put your mind at ease before proceeding with bankruptcy.
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