Bankruptcy and Joint Mortgages: Protecting Your Partner’s Interest
Filing for bankruptcy is a stressful and complicated process, especially when you have joint assets such as a mortgage. If you’re considering filing for bankruptcy in England or Wales, you may be worried about how it will affect your partner’s interest in your shared property. This post is designed to help you understand the implications of bankruptcy on joint mortgages and provide practical advice on how to protect your partner’s interest.
Understanding Bankruptcy and Joint Mortgages
When you declare bankruptcy, your assets are usually seized and used to pay off your debts. However, when it comes to joint assets like a mortgage, things aren’t quite as straightforward.
In the UK, when you share a mortgage with someone else, you are both responsible for the mortgage payments. If you become bankrupt, your share of the property will become part of your bankruptcy estate, but your partner’s share will not be affected.
If you have equity in your property (i.e., the property is worth more than the mortgage), the Official Receiver (the person who manages your bankruptcy) can force the sale of your home to pay off your debts. This can happen even if you only own a small share of the property.
Who Gets What in the Sale?
If your property is sold, the proceeds will be divided according to your ownership shares. For example, if you own 50% of your property, half of the sale proceeds will go to your bankruptcy estate to repay your creditors, and the other half will go to your partner.
Protecting Your Partner’s Interest
There are several ways you might be able to protect your partner’s interest in your joint property if you become bankrupt.
Buying Your Bankruptcy Estate’s Interest
Your partner (or someone else) could buy your bankruptcy estate’s interest in the property. This would mean the property would no longer be at risk of being sold. The cost of buying out your share would be equivalent to your share of the equity in the property.
Delaying the Sale
In some cases, the Official Receiver may agree to delay the sale of your home. This could happen if, for example, you have children living at home, or your partner is unwell and would find it difficult to move. However, this is not guaranteed and would be at the Official Receiver’s discretion.
Applying for a Charging Order
Another option is for your partner to apply for a charging order. This is a legal document that would give your partner the right to receive the money from the sale of the property before any other creditors.
Practical Tips
1. **Get Legal Advice:** Bankruptcy is a complex legal process, and every case is different. It’s important to seek advice from a solicitor or debt adviser before you make any decisions.
2. **Be Honest:** Be completely honest with your partner about your financial situation. Concealing information could lead to more problems down the line.
3. **Consider All Options:** Bankruptcy is not the only debt solution available. You might also want to consider an Individual Voluntary Arrangement (IVA), a Debt Relief Order (DRO), or a debt management plan.
Conclusion
Filing for bankruptcy can have serious implications for your financial future and the future of your partner, especially if you share a mortgage. You should take the time to understand the risks and potential outcomes, and seek professional advice before making any decisions. With the right approach and careful planning, it’s possible to navigate through bankruptcy while protecting your partner’s interest in your shared property.