Does my bankruptcy affect my partner?
By Mr Bankruptcy
18th February 2025
In the 12 months ending 30 June 2024, one in 457 adults in England & Wales went into bankruptcy, according to government figures.
Bankruptcy can be the most appropriate step to take for an individual or a business facing unmanageable debt, but it can also signal emotional anguish and financial upheaval in someone’s personal life. What can be forgotten is that bankruptcy can also affect partners and spouses just as much.
Insolvency and bankruptcy
Insolvency is a financial state when a company or individual can no longer settle their debts or maintain interest payments on time. Bankruptcy is the formal legal procedure which starts after insolvency has been declared so that creditors can recover some, if not all, of their loan.
While it can provide relief and closure, bankruptcy is in no way ‘getting off the hook’. You can be forced to sell assets and there are all sorts of restrictions on what you can do until you are discharged from your bankruptcy (normally after a year). I’ve discussed this in more detail here.
As a debt advisor my clients are often people and businesses dealing with unmanageable debt, and declaring insolvency is one option we discuss. But I always remind a client that if they take that option, they need to consider who else is going to be affected by it.
Who else can be affected by a bankruptcy?
The upshot is that as an individual, any assets that you own outright or have a share in, may have to be sold during the bankruptcy process to pay back your creditors. This can include property such as a family home shared by your other half or other family members. There are some caveats, though.
If you’re the director of a limited liability company, then you (and any fellow directors) aren’t normally held personally liable for your company’s debts. This means your own and your partner’s property and assets are protected from creditors. However, if, as a director, you’ve signed a personal guarantee in the past for an outstanding business loan, then you remain personally liable if your business doesn’t have enough funds to repay it.
If you’re a sole trader, there’s no distinction between you, as a private individual, and your business. So, if your business become insolvent, then you, as the owner, must repay any outstanding debts – whether to banks, suppliers or customers – out of your own pocket. You may need to sell off private assets to make good.
What about shared debts?
If you are declared bankrupt, then you are released from your debts. However, if any debt is jointly held, the other person becomes liable to pay off the whole lot and may be chased by creditors.
Will my partner have to cash in their own assets to pay my debts?
If your partner owns any assets in their own right, and is their sole owner, then they are safe from any court action. This includes savings, money, belongings and property.
What about my home?
A property owned by yourself (either solely or jointly) may have to be sold to help clear your debts, no matter who else lives there. Bankruptcy doesn’t normally affect your home if you’re renting it.
Even if your home is solely in your partner’s name you may still have what’s called a beneficial interest in it, in which case it may have to be sold to clear your debts.
One way to think about beneficial interest is if you’d be entitled to any of the proceeds from the house if it were sold. This may be because you’ve contributed to mortgage payments or paid towards an extension or home improvements.
If the home does have to be sold, you will a delay of up to 12 months to make alternative living arrangements if there are minors in the property. Or your partner or family may be able to raise the funds to buy out your share of the house.
Taking advice
Being declared insolvent is a big step and it’s critical to know all the consequences before taking the decision.
Websites such as Citizen’s Advice and the Government’s own website provide general advice, but everyone’s situation will be unique. Therefore, it’s usually a good idea to talk to a specialist Financial Conduct Authority registered debt advisor who can explore your personal circumstances and lay out your best options. This should take into account anyone else affected.
When tackling growing debt, speed is critical. Seeking out specialist advice as soon as you can will help you get moving in a positive direction.
James Rosa Associates
James Rosa associates is a firm of debt advisors and debt adjustors well known for our supportive, non-judgemental and friendly approach. We offer a full range of advice and professional services to individuals, business owners and directors faced by unmanageable debt and who want a solution. We also help anyone involved in a civil or commercial dispute.
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We know how unmanageable debt can affect lives and want to help as many people as we can. If you are ready to face an unmanageable debt problem, or bring a dispute to a swift and cost-effective resolution, then contact James Rosa Associates, ring 0845 6807217 or email enquiries@jamesrosa.co.uk to find out whether you qualify for our free consultation service.
Please be advised that all views expressed in these posts are those of the author and not of James Rosa Associates ltd.