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Can I Claim Bankruptcy Without My Spouse?

31 January 2019 - Posted by TalkAboutDebt

Wondering how your wife or husband going bankrupt, will affect you? Bankruptcy can have a significant impact on your spouse in many ways as explained in this article. 

Please note, bankruptcy is an individual process, so you can claim bankruptcy without your spouse. In the case which both you and your spouse are going bankrupt, you can choose to go bankrupt at the same time, but it is still an individual process which needs to be done separately (even if your finances are together).


Can I obtain information on my spouse’s bankruptcy?


You will not be able to obtain information regarding your spouse’s bankruptcy from the official receiver (OR) without the permission of your spouse. However, it is likely that the OR will contact you in due course about their bankruptcy to discuss matters in detail. Therefore if you are going bankrupt, you can not hide bankruptcy from your spouse.

We highly recommend that you do not keep your bankruptcy a secret from your spouse, as it could equally impact them too.


Who is liable for my debts?

When money is borrowed in joint names this means that both parties are fully liable for the full amount of the debt and also separately liable for the full amount of the debt. If your spouse goes bankrupt, their liability towards the joint debt will be removed, leaving you fully liable for the full outstanding amount.

If on the other hand, all debts are in your name only or your spouse did not personally guarantee any of your debt then they will not become liable for it once you go bankrupt. Therefore they cannot be asked by the lender to pay the debt. For more information on the liability of debts, please see our article on who is liable for my debt


What will happen to our property?


If your spouse goes bankrupt, generally speaking, your property should not be affected. The general rule of thumb is if you have no interest in the property, do not own any of it, then the property is not at risk in any way. If you are not sure if you have an interest then you may need to check with a solicitor before going bankrupt.

There may be a couple of situations where the OR may be interested in your property:

  • If the bankruptee is deemed to have a beneficial interest in the property (read our article, Beneficial Interest in Bankruptcy)
  • If the property you live in has some equity, and a certain share of that belongs to your bankrupt spouse (jointly-owned property). If this is the case, the OR could ask you to buy your spouse out of the property and give that money to them. Then you will fully own the property.

If your property is in negative equity, it could be that the OR will revisit it in a few years (between 2-3 years) or could completely discharge your spouse’s interest in the property (meaning your spouse’s share and ownership in the property will revert back to you). On the other hand, if you can not afford to buy out your spouse’s share of the property, then you could be forced to sell it. So your spouse’s share can be realised. However, your half of the equity would not be affected.

In some small cases the bankruptee may be named as the owner of the property, but has never made any contribution towards the property. If this is the case for you, then you could argue that you should own a bigger portion of the property than your spouse. This could reduce the amount of equity your spouse owns and in turn, may make it more affordable for you to buy out the interest.

Please be aware that in bankruptcy you can not sell your property to protect it from the OR, as they will consider all assets including any property that has been disposed of within the last 5 years. Therefore if you were to sell your property and give 100% of the equity to an ex-partner or friend the OR in Bankruptcy will pursue them for your 50% interest in the property. Prior to selling your property, the OR will give your spouse the opportunity to buy out your share of the property, if you jointly own the property. This is the only way at this point to remove your spouse’s name from the property.

For more information on how debt can affect your property, please see our article on debt against a property.


My spouse is bankrupt, will this affect my credit rating?


This may have some effect on you if you have joint bills/accounts with your spouse as you will be financially connected. If you apply for any new credit in joint names within the next 6 years, you will probably find that you are declined as your spouse’s credit record will show their bankruptcy for the next 6 years. For more information on what affects your credit rating, please see our article on what can affect your credit rating.


What will happen to our joint bank account?


Normally all accounts with your name on will be frozen in bankruptcy. If you remove your name from the bank account prior to declaring bankrupt, then that bank account should remain unfrozen. Even if your bank account is frozen, it can be unfrozen with the permission of the OR. You might find our article on bank accounts after going bankrupt useful to read. If you would like to remove your spouse’s name from a joint bank account, you can do so by removing your name from the account and creating a sole named account (providing you have no balance outstanding or overdraft on them).

In addition to this, the OR cannot take your spouse’s money from their personal account if you go bankrupt. There are however some occasions when a court can order that money is removed or returned to the bankruptcy. For example, if your spouse had transferred all of their savings into your account to try and avoid them being claimed as part of the bankruptcy then the money could be ordered to be returned by you.


Bankruptcy and your spouse’s belongings


In bankruptcy, ownership of your belongings passes to the OR. This includes any assets that you own, or own a share of and any transactions that you have undertaken. The OR will then see if there is anything to be gained for the bankruptcy by selling those assets. The OR has the power to look back over the last 5 years at any assets you may have disposed of. If they deem that the
disposal of an asset was ‘unfair and unreasonable’ they have the power
to overturn it.

This applies to all goods except those which are exempt. Exempt goods include items needed for your job or business and to satisfy your basic domestic needs. You are legally obliged to disclose details of all your assets to the OR and they can require you to release goods to them. Should you refuse to do this the OR has powers to investigate your assets and could ask the court to issue a warrant to seize. Please read our article, what happens to my belongings in bankruptcy for more details.

Please note assets gained through inheritance cannot be taken in bankruptcy, as these are not owned by you. However, should you die and ownership of this inherited asset was to pass onto the bankruptee, then the OR may have a claim to it. For more details, please read our article inheritance and bankruptcy.


Will my spouse need to pay in Bankruptcy?


In bankruptcy the OR will judge whether an Income Payments Arrangement is appropriate, this is where you make a payment towards your bankruptcy for a period of 3 years. The arrangement is based on your income but your spouse’s contribution to the household will be taken into consideration.


Need more help?

If you have more questions regarding the impact of bankruptcy on your spouse, please take a look at the following resources:

  • Debt Advice Foundation: Provides a free, confidential helpline and can advise you.
  • Official government website: There is all the guidance you need on there and the facility to complete the bankruptcy forms online.
  • Christians Against Poverty: A leading debt charity offering hope and a solution to anyone in debt.

Perhaps a chat with a debt help organisation or the citizen’s advice may also help you decide what’s best for you and your spouse.

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