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

[PlanB]

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

Thank you for explaining that Riz.

I naively thought that like an IVA the BR pays over their salary and the OR distributes it to his/her debtors asap. From what you say it looks like the OR banks any incoming money from the BR and after helping themselves to fees one day anything left over (which is unlikely) gets distributed to the creditors which could be as much as three years later.

In the meantime Wife will have her gas and electricity cut off due to non payment of an outstanding bill for which she is jointly and severely liable for.

I have a horrible feeling I've got that right

[Riz]

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

Pretty much so, I'm afraid.

Basically she will have to work on the assumption nothing will be paid, or if it ever is it might be peanuts and a long long way off.

[oscar]

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

I naively thought that like an IVA the BR pays over their salary and the OR distributes it to his/her debtors asap. From what you say it looks like the OR banks any incoming money from the BR and after helping themselves to fees one day anything left over (which is unlikely) gets distributed to the creditors which could be as much as three years later.

If thats what is meant to happen, it rarely does from what I have seen. Usually dont see anything for at least the first 12 months for the same reason as bankruptcy - the Insolvency Practitioner fees.

[PlanB]

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

Thank you so much guys for your information so far. I think this raises a whole new moral issue. It seems that a Husband who is the breadwinner can go BR leaving his unemployed Wife with joint family debts if it suits his circumstances.
That's not a sexist statement it's a truism

[diddlydee]

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

You've hit the nail on the head, planB, that is exactly how it is. She should concentrate any of her repayment abilities on priority debts, e.g. the counctil tax, gas/electricity, rent/mortgage etc.

For the other debts, she can come to us. Riz is wonderful at all stuff BR, and for anything he doesn't know, he'll know a man (or woman) that does

[PlanB]

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

What about maintenance? If/when Wife divorces the creep can any maintenance he pays her be included in his I & E for the BR (if it's an official court order) and would that only be paid if there is any money left after the OR/Trustee has taken his slice in three years time? Or would it be paid monthly as per court order (if she gets one) and treated as a priority expense? The 'children' are all in their 30s so there won't be child maintenance.

Maybe she could claim pension credit towards her mortgage which is in her sole name now that she is 'single' with no income (the maintenance will take a long time to establish if ever).

[Riz]

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

From OR guidance.

31.7.119 Bankrupt’s obligation to pay under a CSA assessment or family proceedings order

An obligation arising under an order made in family proceedings or under a maintenance assessment made by the Child Support Agency (CSA) under the Child Support Act 1991 is not a debt provable in bankruptcy [note 9]. It is a continuing obligation, payable out of income. Where a bankrupt has surplus income, when making an IPA/IPO assessment the official receiver or trustee must consider the provisions of IA86 section 310(2) [note 10], which expressly prohibits a court from making an IPA/IPO which would have the effect of reducing the bankrupt’s income below that which appears to the court to be necessary for meeting the reasonable domestic needs of the bankrupt and his/her family. The term "family" is restrictively defined for this purpose in section 385(1) of the Insolvency Act 1986 as meaning the persons (if any) who are living with the bankrupt and are dependent on him (or her). See paragraph 31.7.120 where the bankrupt is required to make maintenance payments to a spouse living separately from the bankrupt.

31.7.120 Spouse/civil partner in receipt of maintenance order, living separately from bankrupt
(Amended May 2012)

It may be that in practice, a spouse/civil partner/partner or former spouse/civil partner/partner is in receipt of a maintenance order, but is not living with the bankrupt, and an assessment may have been made under the Child Support Act in respect of a child or children not living with the bankrupt. In these circumstances the obligations of the bankrupt arising from any such order or assessment would not have to be included as a reasonable domestic need of the bankrupt’s "family" to comply with the provisions of section 310(2) because the term "family" is defined under the Insolvency Act 1986 [note 11] as encompassing only dependants living with the bankrupt.

It has been the case however, that when assessing the bankrupt's ability to pay under an IPO, the court has previously held that such obligations are reasonable demands upon a bankrupt’s income and has taken full account of the obligations arising from a maintenance order or a Child Support Agency (CSA) assessment such that it would not make an order for an amount which would limit a bankrupt’s ability to meet those obligations. See also Re X (A Bankrupt) [1996] B.P.I.R. 494 [note 12] and Albert v Albert (A Bankrupt) [1996] B.P.I.R. 232 [note 5].

For this reason the amount payable by a bankrupt under a maintenance order or CSA assessment should be taken into account when calculating the amount which a bankrupt is able to pay under an IPA or IPO, but should be identified as a separate item.

Information concerning the CSA and a calculator for estimating the amount of maintenance the bankrupt will be likely to pay, depending on the number of children, where he/she is the non-resident parent, can be found at http://www.csa.gov.uk/