Will my bankruptcy affect my spouse?
Our first comment is that bankruptcy and how it works does not change because you are married or in a de facto relationship. If the financial affairs of you and your partner are separate, there can be minimal implications from your bankruptcy for your partner. If your financial affairs are intertwined there may be implications for your partner.
We provide a guide below on how your bankruptcy may affect your partner.
How does bankruptcy affect your partner financially?
Bankruptcy will only affect your partner financially if your financial affairs are intermingled. This most commonly occurs if you have joint assets and/or joint liabilities. It can also occur if your partner has an asset that you helped pay for or was gifted by you to your partner.
Assets independently acquired and owned by your partner will not be involved in your bankruptcy.
The full amount of liabilities jointly owed by you and your partner will become owing solely by your partner when you become bankrupt.
How does bankruptcy impact your jointly owned house?
If you jointly own your home with your partner, it is common for the partner to be alarmed at the prospect of losing the house. If this is your situation, our first comment is that the Trustee cannot do anything regarding the house without your partner’s knowledge and agreement. Only if a solution cannot be found, the Trustee can then make an application to the Court for the house to be sold. For bankruptcies we administer, this rarely happens. If your partner wants to save the house, we recommend that you give us a call to discuss your situation before deciding that bankruptcy is right for you.
How does your bankruptcy affect your partner’s privacy?
Your partner’s income will be disclosed to the Trustee of your bankruptcy. You are required to disclose your partner’s income on your Bankruptcy Form when you file for bankruptcy.
Your bankruptcy does not get recorded on your partner’s credit record and your partner is not shown on the NPII (National Personal Insolvency Index which is maintained by the Australian Financial Security Authority) because you have become bankrupt.
Your bankruptcy has no implications for your partner’s separate employment, passport, or overseas travel.
Where your financial affairs are intermingled, the Trustee will communicate with your partner regarding their financial affairs as a necessary process for administering your bankruptcy. If your partner is holding assets on your behalf, the Trustee may investigate your partner’s financial affairs regarding those assets and also check that no other assets are held on your behalf.
How does bankruptcy affect your partner socially?
If you plan a family overseas holiday, whilst you are subject to bankruptcy you are required to obtain written permission for your overseas travel from your trustee. You would have to be doing something seriously wrong for your Trustee to be prevented from approving your travel. It is however something that must be done for you to be able to leave the country and for the family holiday to occur. This requirement does not apply to travel within Australia.
If your partner drives a car that you own and the value of the car exceeds your vehicle threshold value, your spouse may lose the use of the car if unable to pay to your bankrupt estate the value of the car above the threshold value. Presently cars have an auction threshold value of $8,550.
There may also be other lifestyle issues to consider. For example, if you own a boat and enjoy a lifestyle of fishing and water skiing, that lifestyle will be lost if your partner or other family member is not able to buy the boat from your bankrupt estate.
How does bankruptcy affect your family’s day-to-day life?
We are often told that bankruptcy reduces the financial pressure on the family. This is due to your wages being available for living expenses rather than making payments to keep the creditors at bay. We have also been told by people we have helped through bankruptcy that their financial pressure was so extreme that they worked two jobs – to have enough money to keep the creditors at bay. Once bankrupt, the financial pressure subsided, and they were able to go back to working one job. This quickly enabled increased sleep, leisure time, and a better quality of life.
Aside from your spouse, it is worth considering how bankruptcy may also affect your family. For the kids, the biggest issue seems to be whether they can continue at their school and sporting clubs and keep their family pets. Having to change friendship groups can be a big issue. There can be a problem if the family home needs to be sold and the family moves to a different suburb. If housing is an issue for you, talk to us as depending on your circumstances there may be ways for your family to stay living in your home.
How does bankruptcy affect your income?
One thing we like about bankruptcy is that your income is protected to make sure you have sufficient money to live. If you are a high-income earner, you may have to pay income contributions to your bankrupt estate. However, the amount your income must exceed before you are required to pay income contributions increases depending on the number of dependants you have. If your partner does not work, you will have a higher income threshold amount and if you have dependent children or other family members the threshold goes higher again. For details on the income threshold amounts click here
We hope we have been able to give you a quick insight to help you to consider how your bankruptcy may impact your partner and family.
For answers to your questions regarding your situation or bankruptcy generally, you are welcome to give us a call on 1300 060 122 or email: email@example.com
Click here for our article: Will my partner be dragged into my bankruptcy
Click here for our article: Bankruptcy
Click here for our article: What Happens When You Declare Bankruptcy
Click here for our article: What happens when you become bankrupt with Nicholls & Co