Can creditors take my wife’s house in the UK
If your spouse and you are married, you may be wondering if your creditors can reach your spouse’s assets in order to recover any unpaid debt. You should be confident about your position before any payment is due or you become bankrupt. As a general rule, creditors are only allowed to pursue assets that belong to the debtor. If your spouse owns the property, it is unlikely that a creditor will be able to claim it. Helix Law can provide further advice. Our commercial and property litigation teams frequently act for creditors seeking recovery against assets, although less often, we also act for debtors and third parties in seeking to defend against creditor applications.
Legal Basis for Creditor Action
Charging Orders
A charging order allows a creditor to secure a debt against a property, such as a house. The court will grant the charge against a party’s interest in the asset. Even if you’re not the sole owner, this can still happen. The sale proceeds will be used to settle the debt owed to the creditor. The proceeds of the sale will be used to settle the debt owed to the creditor. It is usually the last resort, after other methods have been explored to enforce payment.
Bankruptcy Proceedings
If you have debts exceeding PS5,000 that you cannot pay, your lenders may serve a statutory demand on you before issuing a petition for your bankruptcy. You can also file for bankruptcy on your own. Once the court declares that you are bankrupt, they will appoint an administrator to manage your assets and sell what is needed to pay your outstanding debts. This could include selling your home even if you own it jointly with your spouse. The court will not order an immediate sale when it would be disproportionate or cause the parties undue burden.
When Is a Spouse’s Property at Risk From Creditors?
Joint Ownership
Whether a creditor can access your spouse’s property depends on how you hold it. It is important to note that the legal title of property is usually held by a joint tenant or tenants in common. The names may suggest otherwise, but these legal names are used to describe joint ownership. Joint Tenancy: Both of you own the property and have equal rights. The entire asset is at risk, even if only one of you is registered as the debtor. Tenancy in Common: Each individual has a defined portion of the property. Creditors can only enforce debts against that specific share.
However a charging order may be used to end a joint tenancy and give each owner their own share of the property. If the court orders the sale, only the debtor’s share of proceeds will be used to repay the debt.
Trust Arrangements
If you and your spouse’s names appear on the title deeds to a house, you each have a legal interest in it. Your lenders may still try to establish a beneficial interest in the property even if your name is not on the title. This can be done through a constructive or resulting trust. These trusts can be created if you contributed financially to the property or if there is a shared intention to share the property with the other owner. If a court finds that a trust has been established, creditors can enforce their debts against your beneficial share.
Guarantees & Secured Debts
- If you act as a guarantee for a loan taken out in your spouse’s names, your assets are at risk if they default and cannot pay it back. If you default on a secured loan, your creditors may be able to claim the asset and force its sale.
- Ways To Protect a Spouse’s Property From Creditors
Legal Ownership and Trusts
A good way to protect your spouse’s property is to ensure they are the sole owner of it. Legally, it means that only their name appears on the title deeds. Transferring Ownership
A joint asset can be protected from creditors by transferring it into your spouse’s name. If you are doing this to avoid liability and to defraud people who you owe money, the court may reverse the transaction. It is important to seek legal advice before making any decisions. Financial Separation
To avoid accidentally establishing a beneficial interest in the assets of your spouse, it is best to keep your finances separate. This includes joint mortgage payments, accounts shared, or financial contributions to the upkeep of property. If you are concerned about creditors claiming against your assets or those of your partner, you should seek legal advice. Our commercial and property litigation teams have extensive experience in guiding clients and protecting assets during a dispute. Can Creditors Take my House in the UK?
Creditors cannot take your house unless you are the named debtor, and if you have an interest in it. They cannot claim property that is owned by your spouse. However, they can claim you have an interest in the property if you made a financial contribution to it or if there was a shared intention. What Happens to Property When Partners Separate?
When couples separate, the court will deal with their proprietary rights in a financial settlement. After a divorce, the parties can either agree on how to divide the property or leave it to the court. The division of property between unmarried coowners depends on their contributions and the type of ownership. Can Jointly Owned Property Be Seized in the UK?
In certain circumstances, creditors may be able to access jointly owned property in order to pay outstanding debts. Before they can apply for a charging orders to secure a debt against an asset, they must first obtain a County Court Judgment. In certain situations, they may seek to have the home sold and the proceeds used to settle the debt.
Final Thoughts
While creditors cannot generally seize a spouse’s property if it is in their sole name, there are circumstances where a debtor’s jointly owned property may be at risk. Creditors may seek bankruptcy or charging orders in order to recover debts. A debtor cannot sell, dispose of or diminish their assets for less than their market value.
