If your debts are in your name then your partner is not liable for any payments. Their assets cannot be taken into account to repay your creditors and a bailiff cannot take items belonging to your non-bankrupt partner.
Bankruptcy will not directly affect your partner – but there can be other indirect implications.
How does bankruptcy indirectly affect my spouse/partner?
Whether a bankrupt person will be required to make Payments From Income and at what level needs to be determined. The Official Receiver may request information about your partner’s income and the household outgoings as this impacts your ability to make such payments.
What if we have joint debts in Bankruptcy?
Bankruptcy will affect your spouse/partner if you have joint debts. You are not liable for someone else debts just because you are married to them.
A common misconception is that if you have joint debts, each party is only liable for half of the debt. This is not the case. If you have joint debts and you are made bankrupt then your non-bankrupt spouse/partner will be liable for the total debt. For more information see Bankruptcy With Joint Debts.
What if we own our home in joint names?
If you jointly own your home, you both have what is called a beneficial interest This forms part of your estate and the property may have to be sold to go towards paying what you owe.
Beneficial Interest means – your share of the money if an asset, such as a property, is sold.
When you are made bankrupt, your beneficial interest always transfers to the Official Receiver or Trustee. However, your spouse/partner can buy your interest in the home from the controlling Trustee. This helps the Trustee realise the value of your interest in your home and they can pay this money to your creditors.
Realise in this context means – to sell to raise money.
While the share owned by your spouse or partner can’t be used to pay towards your debts in the bankruptcy, its sale can be forced to get hold of your share.
Don’t assume that because your house is jointly owned that it won’t be sold to repay your debts. If your partner and/or dependent children live at the property it is possible for the sale of your home in the bankruptcy to be delayed for twelve months in order that alternative housing arrangements can be made.
What if our home is only one of our names?
Then it can become complex as it depends, in the absence of anything in writing, upon implied beneficial interest.
Remember, only the beneficial interest of the bankrupt person can be forced to be paid into the bankruptcy. It is therefore advantageous that the bankrupt person does not have a beneficial interest and that the non-bankrupt person has such an interest.
There is a stronger case for beneficial interest if you are married and there are children involved and the property is a family home to which you’ve been making a financial contribution.
The case is less strong if your not married and have only been together a short time and you have not made deposit nor mortgage contributions.
In cases of dispute; a forensic examination of the finances of all parties involved may be required. Putting the property in the name of one party and claiming a 100% beneficial interest yet the other party has been making mortgage repayments will not fool the Official Receiver/Trustee.
Please contact for advice if any of this is of concern to you.