Your partner is in no way liable for your debt. The only time they could be affected is when you jointly own an asset of value, such as a property. Here the Official Receiver (OR) could have an interest in it. This article answers the question: How will bankruptcy affect my partner? Some of the ways your partner may be affected in bankruptcy are described below.
Will my partner have to pay for the debt if I go bankrupt?
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). The council will no longer be able to chase the bankruptee for 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. They will ask them for all of the debt. The council will not be able to recover the money if there is no-one else responsible. They will then have to make a decision to write off the debt.
Also, while your partner is not liable for any of your debts, the bailiff can still seize goods belonging to your partner. 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. These 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. This will result in a calculation about how much money they have left over to pay the debt.
Please take a look at this article on prenuptial agreements in bankruptcy for more information.
Will my partner’s earnings be affected in bankruptcy?
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.
Will bankruptcy affect my partner’s credit rating?
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.
How will my partner’s property be affected?
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:
- If you have made any substantial contribution to the house, perhaps added an extension or paid a sum off the mortgage.
- If you have joint accounts or if you are paying a higher percentage of the household bills which may have a financial impact on the household.
- You are jointly named on the title deeds or have a joint mortgage (Read our article, Joint mortgages and bankruptcy).
- If you have beneficial interest in the property. Please read our article, Beneficial Interest and Bankruptcy for more information.
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).
My partner is renting a property, does bankruptcy affect them?
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.
How will our jointly owned property be affected?
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.
Can my partner purchase a new 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.
What will happen to my joint bank account with my partner?
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.
The OR only wants money belonging to the bankruptee. If your partner is using your bank account, this will only impact you if the money belongs to the bankruptee. For example, if the bankruptee has been using your account for their wages then this money is available to bankruptcy.
Will bankruptcy affect my partner in the future?
In most cases, bankruptcy will not affect your partner. However, bankruptcy can impact you in the future. This is usually when you form a link. Examples of this could include:
- An application for a joint bank account at a later date
- Completing a form to look at a mortgage, remortgage or additional borrowing
- Required to pay any disposable income they have into the bankruptcy for 3 years which may impact the household.
- Applications for financial products, or service. This may require your partner’s details.
What if my circumstances change?
You must contact the OR immediately during a circumstance change (i.e. you are now a stay at home parent or married). As this changes a significant amount in your household with regard to income and living costs.
You may also want to read this article on how bankruptcy can affect your spouse.
Need more help?
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. They can look at your financial statement to identify other options. And put your mind at ease before proceeding with bankruptcy.
Below is a list of useful resources and contacts to help you further:
- Debt Advice Foundation which provides a free, confidential helpline and can advise you.
- CAP UK: A leading debt charity offering hope and a solution to anyone in debt.
- The Insolvency Service: has the official publications on bankruptcy and the facilities to complete your forms online. You should take advice from an insolvency practitioner.
- R3 Business Recovery Professionals: You can find a local IP using this service.
- Please also take a look at this Business Debtline leaflet on partnerships.
- Christians Against Poverty: A leading debt charity offering hope and a solution to anyone in debt.