What happens to joint debts when only one person goes bankrupt?

[PlanB]

The week before Christmas my friend's alcoholic husband left home when she discovered that he'd cleaned out their son's bank account (separate thread coming soon). He now plans to go bankrupt. There are plenty of joint credit cards and bank accounts which are all defaulted. They are deep in debt.

What will get absorbed into the BR? Will Wife be left with 50% liability of each joint financial product or can Husband put them all into his BR? Please say "yes" to the second option Or could she be left to deal with the whole lot while he gets away scot free? She has no income except from lodgers and her state pension.

The house is in her sole name with negative equity so although in theory he has a financial interest in the property as the matrimonial home despite his name not being on the deeds, there is no money to be had.

[Riz]

Re: What happens to joint debts when only one person goes bankrupt?

Credit cards are responsibility of the single account holder, rather than being joint. So depends who is the account holder and who is a named card holder?

Debts on joint bank accounts will fall completely to her. No 50/50 split. She will be liable for the lot. Sorry.

[SXGuy]

Re: What happens to joint debts when only one person goes bankrupt?

Agreed with Riz.

[diddlydee]

Re: What happens to joint debts when only one person goes bankrupt?

At the end of the day, whilst she might cop it for the lot, she can't pay what she doesn't have. I think she would be an ideal candidate for getting "Niddified"

I hope you are able to recommend she visits us, PlanB

[PlanB]

Re: What happens to joint debts when only one person goes bankrupt?

Debts on joint bank accounts will fall completely to her. No 50/50 split. She will be liable for the lot.

That's not nice. Even though Husband is currently jointly liable for the debt he can't include it in his BR. Bastard (the husband not you Riz).

What would happen if they both went BR, who would pay the debt then? Husband or Wife? Presumably it would have to be included in someone's BR.

If Husband goes BR can she make all the subsequent decisions on any joint debts without his permission or signature since she'll be 100% liable for them? Can she close the accounts etc? It's a terrifying thought that he could surface after 12 months of BR with a clean slate and then take control of the joint account again.

I'm talking to her tomorrow in depth so I'll dig a bit deeper into the background. I fear it's one of those situations when she let him handle everything financial during a 40 year marriage and only now are the skeletons coming out of the cupboard.

What a mess

[PlanB]

Re: What happens to joint debts when only one person goes bankrupt?

I hope you are able to recommend she visits us, PlanB

She already has

She's struggling to understand the basics and doesn't even know half of what he's done because he's destroyed all the evidence - she can't find any bank statements. He basically drank all the money due to his alcoholism. Now there's nothing left to take he's gone

It's a bit late to tell her she shouldn't have had joint finances with the creep because she loved the creep.

[Never-In-Doubt]

Re: What happens to joint debts when only one person goes bankrupt?

If husband went BR first and she did after, she'd include it on hers as she's solely liable upon his BR as joint loans are either/or for repayment.

[Never-In-Doubt]

Re: What happens to joint debts when only one person goes bankrupt?

After BR he would have nothing to do with the old joint loans as they'd move automatically into a sole one in Mrs name unless she also went BR. So assume this scenario and Mrs was on a DMP or whatever, that'd continue as it'd be solely hers.

Mr going BR relieves himself of any burden on joint debts.

[diddlydee]

Re: What happens to joint debts when only one person goes bankrupt?

planB. He will still include any debts for which he is liable in his BR paperwork, however, the debts don't go away when there is another party that they can transfer the liability to. When you sign any loan/overdraft etc. you generally sign as jointly and severally liable, ie. they can claim the full amount from either party. Once one has gone BR they can no longer be chased for the debt, so the full balance falls to the other debtor.

It does seem unfair, I know, but that's how it works.

I don't know anything about credit cards though, although Riz has answered that point above.

BR might be an option for her, but, I would seriously look at UE first.

[PlanB]

Re: What happens to joint debts when only one person goes bankrupt?

He will still include any debts for which he is liable in his BR paperwork, however, the debts don't go away when there is another party that they can transfer the liability to. When you sign any loan/overdraft etc. you generally sign as jointly and severally liable, ie. they can claim the full amount from either party. Once one has gone BR they can no longer be chased for the debt, so the full balance falls to the other debtor.

Sorry to be so stupid but do you mean Husband would list the joint bank accounts in his BR paperwork and if he has any income (which he does) during the 12 month BR period some of that would be paid towards those joint account debts pro rata with his other creditors?

Then when Husband is discharged he will not have any liability for the joint account debts even if she leaves his name on them?

I know we don't like to give help by proxy on here but at the moment she's too traumatised to post so I'm acting as her interpreter until the Prozac kicks in.

[PlanB]

Re: What happens to joint debts when only one person goes bankrupt?

One more question (sorry ) what about joint utility bills such as Gas, Electricity, Water Rates and Council Tax? Would 50% of those go into the Husband's BR or would Wife cop the lot?

[Riz]

Re: What happens to joint debts when only one person goes bankrupt?

Sorry to be so stupid but do you mean Husband would list the joint bank accounts in his BR paperwork

Yes, they are his debts as much as hers, jointly and severally liable. He MUST list them.

BR is primarily about liability. When you are discharged, it does not discharge the debt, it discharges your liability for it.

and if he has any income (which he does) during the 12 month BR period some of that would be paid towards those joint account debts pro rata with his other creditors?

Payment agreement could be for up to 3 years, and yes, if surplus then creditors would be paid pro rata at the end of that, on whatever the balance was at time of disbursement as far as I know.

I can double check that one...

Then when Husband is discharged he will not have any liability for the joint account debts even if she leaves his name on them?

Yes, his personal liability will have ended. As the bank would be informed of the BR order, they would no doubt remove him from the account, close it, or both.

[Riz]

Re: What happens to joint debts when only one person goes bankrupt?

One more question (sorry ) what about joint utility bills such as Gas, Electricity, Water Rates and Council Tax? Would 50% of those go into the Husband's BR or would Wife cop the lot?

Ones where she is definitely legally jointly and severally liable, through being in joint names or cases where all occupants are liable no matter who is named on the bill, she would cop the lot, yes.

[PlanB]

Re: What happens to joint debts when only one person goes bankrupt?

Ones where she is definitely legally jointly and severally liable, through being in joint names or cases where all occupants are liable no matter who is named on the bill, she would cop the lot, yes.

But Husband would list them in his BR and pay towards them from his income pro rata with his other creditors? Can you explain to me how the pro rata amount would be established with joint debts, please.

Council Tax may be an exception for different reasons. Maybe Husband is liable solely for his share of the Council Tax bill because abandoned Wife will be entitled to Single Person Exemption from when he walked out and he would only be liable for his share/liability of the historical debt (i.e. before he dumped her and left the property)?

[Riz]

Re: What happens to joint debts when only one person goes bankrupt?

He doesn't pay pro rata himself. He pays into the bankruptcy estate that may eventually, likely years down the road pay a dividend to creditors. To be honest, in personal BR cases not many actually get anything. Most of it is eaten up in fees of the Official Receiver and/or trustee.

I'l have to check how a final disbursement would work. i.e. whether creditors would receive pro rata on what the original balance was, or what the balance is when the dividend is paid. Whichever way it's done, their payment would not be such that they get paid the debt more than once from either party.

No matter that, in the meantime, creditors will be able to come after her for whatever full amount is outstanding. The fact that creditors "might" get something from his BR estate in a few years "if" something is still owed then, does not stop them coming after the full amount now. Crap I know.