Filing for bankruptcy can be confusing and stressful enough for a single person, let alone a married one – married applicants often worry about how the process might affect their partner.
Below, we’ll give a quick overview of how declaring bankruptcy when married could affect your spouse.
In England and Wales, anything acquired after marriage is considered joint property.
Anything you acquired before the marriage, however, is typically yours and yours alone.
Both types of property could be subject to liquidation by your trustee (the person appointed to oversee the bankruptcy process) in an effort to repay as much debt as possible.
When it comes to jointly-owned property, one exception is low-value assets – these will often be overlooked by the trustee. For example, a relatively cheap family car that your spouse requires to get to work will usually not be repossessed.
Another way to keep jointly-owned goods from being repossessed is if your spouse buys your share from the trustee.
While you may be defaulting on any loans you took out with your spouse, your spouse isn’t and so will still be liable.
Check out this resource for a bit more in-depth information about how bankruptcy affects jointly-owned property.
What About the Home?
Family homes are typically the largest concern of married individuals filing for bankruptcy. If your spouse owns the home completely – and can show that you would not be entitled to any money made from selling the home – the trustee will ignore it. This means your spouse paid the full price of the home as well as the entire mortgage.
A home is usually jointly owned, however, which means the trustee will repossess it if they have to.
Luckily, there are safeguards in place to protect the spouse and any children.
First, the spouse can apply to delay the sale for 12 months, which will be considered by a court.
If you have a disabled child and the house has been adapted to their needs, this may count as an “exceptional circumstance” and halt the sale of the home. Another exceptional circumstance is if you or your spouse are over 70.
By selling the home, the trustee is attempting to gain your share of its value. That’s why one workaround could be your spouse by buying your share from the trustee – they are paying that fair market price in order to halt the sale.
Will Declaring Bankruptcy Affect My Spouse’s Credit Rating?
Fortunately, your spouse’s credit rating will usually not be affected by your declaration of bankruptcy. However, since you share an address, it may be harder for your spouse to acquire loans.
Overall, filing for bankruptcy when married will have an effect on your spouse. Luckily, there are ways to minimize any damage done, so do your best to learn as much as you can about this process before pursuing it.