Implications of Your Partner Being Declared Bankrupt

photo credit: David13Or

It is a common situation for one partner in a marriage or relationship to get themselves into serious debt, sometimes without their partner knowing anything about it. So what are the consequences for the partner with no debt problem?

Firstly it is important to remember that your partners debts are not your own. You cannot be made responsible for paying them directly. However there are some implications for the debt-free partner in a relationship with someone in debt crisis:

1. Your credit score. If you live with your partner then most likely the credit reference agencies will have linked your records and your partners. This means that as soon as they start missing payments on their debts your credit rating will be affected. You may find it increasingly difficult to get/keep credit agreements. This situation will get worse as your partners debt crisis gets more severe. If your partner is declared bankrupt then you will be very lucky to get any unsecured credit.

2. Any shared debts. If you have a joint debt like a joint account or a debt that you have signed up for together then you will most likely be “jointly and severally liable” which means that if your partner cannot pay up then the creditor will come after you for the full amount owed (not half of it).

3. If your partner declares themselves bankrupt then any assets that you jointly own like your home will be at risk of being sold (although you will have at least a year after bankruptcy is declared before the house has to be sold) . Only the share of the asset that is owned by your partner will be taken, but in practice this often means that the house has to be sold. There are ways of taking your house out of the equation before your partner declares themselves bankrupt but these do require the debt-free partner to “buy out” their partner using a mortgage in their name or funds from relatives etc.

4. If your partner wants to enter an informal arrangement, debt management plan or IVA then your joint income will be taken into account when calculating how much your partner can afford to pay. The situation is slightly different with bankruptcy in that you cannot be forced to contribute anything towards the bankruptcy from your income. Also, your partner should not say that they pay half of the mortgage/rent etc. and you pay the other half. It is perfectly OK for them to say that they pay ALL of these essential bills and therefore make it less likely that they have an excess that the insolvency service will want to take.

Tags: Bankruptcy, Debt Advice, Debt Solutions