Financial struggles can often result in troubled relationships and even divorce. Worrying about where the money for the next bill will come from can lead to strains and arguments in most couples suffering from financial worry.
If divorce should occur, there aren’t just the assets to worry about. Personal debt within a marriage can be problematic when it comes to divorce, whether it’s a joint name or sole debt. There are various types of debt to face in divorce, but bankruptcy is perhaps one of the most worrying for most. There are bankruptcy attorneys who can help you out though.
What happens in bankruptcy?
During a transition of bankruptcy, all of the assets once owned by the person are now held by the Trustee in Bankruptcy, leaving the person in debt without ownership of the vast majority of their assets.
In the case of someone holding a mortgage, this would obviously include the family home; however, research has found that 77% of those declaring bankruptcy are non-home owners. This has an obvious after-effect upon the married partner of the person in bankruptcy.
The matrimonial assets are much smaller once one person has filed for bankruptcy; if a family home is partly owned by a person who is bankrupt, the mortgage cannot be transferred over to the non-bankrupt spouse without a court order or approval of the Trustee in Bankruptcy, which can be difficult to attain.
Bankruptcy and divorce
Upon divorcing, there may be a risk of a partner becoming bankrupt in the proceedings. As a partner may wish to transfer a home into their own name, they can only do so if they can afford to buy the bankrupt’s share at market value which is often impossible.
Meanwhile, for those with children under the age of 18, a person who has filed for bankruptcy will likely be unable to pay for maintenance, forcing the other partner to slide into further debt. This is due to the fact that any income and earnings by the bankrupt person will be in the hands of the Trustee and generally used to discharge the debts.
Who files for bankruptcy?
While we know that the vast majority of those who file are not homeowners, there are some general trends amongst those to file that can help ease the minds of those wondering if they are at risk.
Research has found that the average level of debt for those filing is around £40,000 – £50,000 and 64% have dealt with more than five different creditors. Surprisingly, only 5% of those filing had no income whatsoever, meaning that the vast majority do have a regular wage coming in. Of those with a regular income looking for bankruptcy advice, most earned below £1,500 per month, meaning that they are likely to have taken out loans to subsidize their low income.