Spousal Liability for Debt

9th July 2017

There has been a very important but little reported case recently which has far reaching implications for both married and unmarried couples in so far as their liability for the others debt is concerned, especially when it relates to business debt. In this case there had been a bank loan by the husband for the purposes of his business. The husband became bankrupt and the loan and other debts could not be paid back in full from his share of assets. The Trustee in Bankruptcy sought a sale of the marital home and effectively that the loan be repaid from the wife’s share of the property on the grounds that whilst the parties were together she must have indirectly had some of the benefit of that loan by virtue of the money and income it brought in from the husband’s business. The Court of Appeal rejected the argument saying that firstly the foreseeable benefit from the loan, in so far as the business was concerned, was uncertain and secondly the husband and wife had not operated as a single unit financially, they had kept finances separate. To make such an order which meant that the wife would be paying the husband’s debts would therefore be inequitable. This however does have some implications. In this case the loan was not put directly into the marital pot but into the husband’s business and there is no understanding of what might happen if the loan was directly beneficial to both parties. Secondly the parties had kept their financial matters separately and apart which infers the outcome might have been different had they intermingled their marital assets.

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