Bankrupts’ partners in danger as debt problems soar

FRIDAY, JUNE 16, 2006

Nearly 24,000 people either declared themselves bankrupt or took out an IVA (individual voluntary arrangement) in the first 3 months of 2006; the highest ever number of insolvencies in the UK.

The threat of bankruptcy to an individual is bad enough, but bankrupts' partners are increasingly in the firing line. If a person in the UK becomes bankrupt their partner could in an extreme case also become liable for half of any remaining debts, and could even face the possibility of losing their home.

Keith Tondeur, national director of the debt charity Credit Action, discussed what can happen if a partner becomes bankrupt in a recent interview with the Guardian newspaper.

He acknowledged that most people facing insolvency or bankruptcies are primarily concerned about what will happen to the family home.

Usually, if a property is solely in the name of the bankrupt individual, then the home will be sold and used to pay off debtors, although the sale can be delayed for up to a year to allow a family to find new accommodation.

If the home is jointly owned, the bankrupt's partner will be given an opportunity to buy his or her share of the home, and Mr Tondeur advised that this would usually be the best option for many if they could afford to do so.

In the case where a bankrupt's partner cannot afford to buy the remaining equity, then the home would likely be sold with half the sum raised being used to pay off bad debt, and the other half would be passed to the non-bankrupt partner for him or her to keep.

It's not just partners' homes that are affected by bankruptcy. Partners are also liable for other debts in joint names, such as a bank overdraft, for example, for which the partner will likely be pursued for any outstanding debt after bankruptcy has been declared. If a joint account is in credit then some of the money will be used to pay off creditors, and some may be returned to non-bankrupt partners depending on the decision of the Official Receiver.

Clearly there are many complex issues regarding bankruptcy and its implications for bankrupt individuals' husbands, wives or partners, and individuals in this situation are urged to seek professional bankruptcy advice.