Can Creditors Take My Wife’s House in the UK?

If you’re married and have debts in your name, you may wonder whether your creditors can access your spouse’s assets to recover any unpaid debt. Before any payment becomes due or you are made bankrupt, you should be confident in your position regarding your partner’s assets. 

As a starting point, creditors can usually only go after assets belonging to the debtor. Therefore, if your spouse’s property is in their sole name, it’s unlikely to be subject to a claim.

This article explains the legal basis for creditor claims, when your spouse’s property may be at risk, and how to protect it. For further advice, contact Helix Law. Our commercial and property litigation teams frequently act for creditors seeking recovery against assets, although less often, we also act for debtors and third parties in seeking to defend against creditor applications.

Legal Basis for Creditor Action

Charging Orders

A charging order allows a creditor to secure a debt against a property, such as a house. The court grants the charge against the party’s interest in an asset. This can happen even if you are not the sole owner of the asset. Once a creditor has a charging order, they are entitled to seek an order for sale of the property. The sale proceeds will be used to settle payment owed to the creditor.

A creditor usually applies for a County Court Judgment (CCJ) against the debtor before seeking a charging order. It’s usually a last resort after exploring other methods of enforcing payment. 

Bankruptcy Proceedings

If you have debts exceeding £5,000 that you cannot pay, your lenders may serve a statutory demand on you before issuing a petition for your bankruptcy. You may also apply for bankruptcy yourself. 

Once the court declares you bankrupt, it will appoint a trustee in bankruptcy to manage your assets, including selling what is necessary to settle your outstanding debts. This may include realising your interest in your home, even if jointly owned with your spouse. The court will not generally order an immediate sale if to do so would be disproportionate and cause the parties undue hardship. 

When Is a Spouse’s Property at Risk From Creditors?

Joint Ownership

Whether a creditor can access your spouse’s property depends on how you hold it. The starting point is that most often the legal title to property is held as a joint tenancy or as tenants in common. Although the names suggest it- this has nothing to do with ‘tenants’ and these are legal names for joint ownership. You can jointly own your beneficial interest in property in one of two ways:

• Joint Tenancy: You both own and have equal rights to the entire property. Therefore, the whole asset is at risk from creditors even if the debt is only registered in one of your names. 
• Tenancy in Common: Each person has a defined share of the property, so creditors can only enforce a debt against the debtor’s specific share. 

However, a charging order can sever a joint tenancy, leaving each owner with their own share in the property. If the court orders a sale, only the debtor’s share of the proceeds will be used to pay off the debt. 

Trust Arrangements

If you and your spouse’s names appear on the title deeds to a house, you each have a legal interest in it. If your name isn’t on the title, your lenders may still seek to establish that you have a beneficial interest through a resulting or constructive trust. 

These trusts can arise if you have contributed to the property financially or have a common intention to share it with the other owner. If the court considers that a trust exists, creditors will be able to enforce the debt against your beneficial share. 

Guarantees and Secured Debts

Acting as a guarantor for a loan in your spouse’s name means your assets will be vulnerable if your spouse defaults and cannot repay it. Similarly, if you default on a loan which is secured against your partner’s asset, your creditors can claim against it and force its sale. 

Ways To Protect a Spouse’s Property From Creditors

Legal Ownership and Trusts

A good way to protect your spouse’s property is to ensure they are the sole owner of it. Legally, this means only their name is on the deeds and register of title. 

Transferring Ownership 

Transferring a jointly owned asset into your spouse’s sole name is a potential way to guard it from creditors. However, if you do this intending to defraud the people you owe money to and avoid liability, the court can reverse such a transaction. You should, therefore, take legal advice before deciding how to proceed. 

Financial Separation 

To ensure you don’t inadvertently establish a beneficial interest in your spouse’s assets, it is generally advisable to keep all your finances separate. This includes things like joint mortgage payments, shared accounts, or any financial contributions towards the upkeep of a property. 

Seeking Legal Advice

If you’re concerned about creditor claims against you or your partner’s assets, speak to a specialist litigation solicitor for advice on where you stand. Our commercial and property litigation team have experience with guiding clients through their options and helping to pursue and protect assets in the context of a dispute to minimise risk. 

Frequently Asked Questions

Can Creditors Take My House in The UK?

Creditors can only take your home if you’re the named debtor and have some interest in it. They cannot claim against property owned solely by your spouse, although they may claim you have a beneficial interest if you have made a financial contribution or there was a common intention for you to hold such an interest. 

What Happens to Property When Partners Split Up?

When partners separate, the court deals with their proprietary interests in a financial settlement. Following divorce proceedings, the parties may agree on the property’s division or refer it to a court to decide. For unmarried co-owners, division depends on the type of ownership and their respective contributions. 

Can Jointly Owned Property be Seized in the UK?

In some circumstances, creditors can access jointly owned property to pay outstanding debts. They must obtain a County Court Judgment (CCJ) before applying for a charging order to secure the debt against an asset. In some situations, they can seek an order for the home to be sold and the proceeds released to settle the debt. 

Final Thoughts

While creditors cannot generally seize a spouse’s property if it is in their sole name, there are circumstances where a debtor’s jointly owned property may be at risk. Legal and beneficial interests may be subject to claims, with creditors seeking bankruptcy or charging orders to recover debts. A debtor cannot sell, dispose of or diminish their assets for less than their market value.

Understanding ownership structures, trust arrangements, and financial separation is vital to help protect assets from creditor action. 

If you are facing a situation where you believe that debts are owed to creditors and you are concerned regarding you and your partner’s assets, contact our specialist commercial and property litigation team and we will be happy to assist you. We act nationally in these disputes and are well placed to help you with solutions. Contact Helix Law today; we would love to help you.