Does Bankruptcy Affect My Spouse?
If you cannot pay your debts when they are due, you are insolvent. You may be declared bankrupt by your creditors or you may decide to declare yourself bankrupt in order to put an end to your current situation and move forward. This article explains the impact of bankruptcy on your partner and any assets you may have in common. Contact a member of the commercial litigation team at Helix Law for more information. We will be happy to help. The bankrupt loses control of their assets, and a Trustee In Bankruptcy will be appointed to manage the bankruptcy estate and realise it for your creditors.
Bankruptcy can be compared to a financial death. The TiB will act as an executor and collect and realise your estate on behalf of your creditors.
Joint Debts and Bankruptcy
When two parties take out a loan together, they usually become jointly and severally responsible for repaying it. If one party is bankrupt, the lender will ask the other party to repay the loan. What Happens to a Family House When a Bankrupt Individual Files?
Whatever happens to the home is arguably the most important consideration when he or she files for bankruptcy. If the TiB sells your house, it depends on a few factors:
Value – The trustee will evaluate the equity of the home to determine if it is worth realising. If the equity is low or negative, they are less likely to sell your property.
Sole ownership: The TiB cannot access the property when the bankrupt isn’t a legal owner, unless he convinces the court that the bankruptcy has a beneficial claim to the land. In this case, his share will become a realisable assets. Joint Ownership: When parties own property together, the TiB can try to sell the bankrupt’s portion by obtaining a sale order. They are usually open to the spouse purchasing the bankrupt’s portion of the bankruptcy estate. Children: If spouses are living with minor children in the family home, then the TiB can delay the sale to avoid causing the children undue hardship. If the TiB decides that it will force the sale of the family house, the non bankrupt spouse is entitled to a share of the net proceeds. How Does Bankruptcy Impact a Spouse’s High-Valued Assets?
Any assets of high value that your spouse solely owns will be unaffected by your bankruptcy. If you transfer high-value assets to your spouse anticipating insolvency, the trustee will investigate to determine if these transactions were made to avoid liability. In this case, the TiB may still recover the assets and return them to the bankruptcy estate for creditors.
The transactions listed below will likely lead to a further investigation:
Transfers or high-value items at a price lower than the market value.
Significant payments or gifts. Opening joint accounts or investment portfolios.
- It is important to keep records of all transactions, and to seek expert advice before completing any transactions.
- Final Thoughts
- While bankruptcy is an individual legal process, it can have significant consequences for a spouse, particularly regarding joint debts and shared property. Understanding the impact of this situation on your family home and high-value assets will help you navigate a stressful time.
- We are usually involved to try and prevent a bankruptcy order from being made. Contact Helix Law for expert advice if you or your spouse is facing financial problems. We will be happy to help. Our solicitors will give you tailored advice that will help you protect your rights and give you peace-of-mind. We are happy to help you.
