“Till death do us part.” Regardless of whether this is or was part of your marriage vows, marriage does entail a level of legal responsibility towards your spouse. Sometimes, life isn’t smooth-sailing and some people are dealt with a worse hand than most.
If you find yourself in a situation where the person you love and want to marry is in a bad financial situation and declared a bankrupt, you may be reconsidering your options. If you are already married, you may be worried about how your children and household will be affected by your spouse’s bankruptcy. Before you decide on your next step, here’s what you need to know if your (future) spouse is bankrupt.
#1 Your Spouse’s Individual Debt Before Marriage Doesn’t Automatically Transfer Over To You After Marriage
If you are not yet married, rest assured that you are not legally responsible for your spouse’s debts incurred before marriage. However, this assumes that you don’t have any financial ties with him prior to marriage. If you act as a guarantor for his or her loans or have opened a joint account with him, you are legally liable (both before and after marriage).
Your spouse’s debt incurred before marriage will not be transferred over you after marriage. Likewise, your credit score will not be affected by your spouse’s poor credit history, as long as you maintain separate accounts.
#2 Your Household Finances Are Likely To Be Affected
While you will not inherit his debts before marriage, your household finances are likely to be affected. As a bankrupt, your spouse will be committed to a debt repayment plan which will be determined by the Official Assignee. While the Official Assignee would account for reasonable house expenses in the debt repayment plan, you can expect that much of your spouse’s income would go towards debt repayment instead of contributing to luxuries, such as family holidays. In fact, your bankrupt spouse will not be able to travel overseas without the permission of the Official Assignee.
Additionally, gifts given by the husband to the wife (prior to bankruptcy) may be claimed by creditors, if the husband becomes bankrupt.
If the wife loans money to her husband for his business, and the husband becomes bankrupt, the loan forms part of the overall debt owed but the wife remains last in priority after repayment of other creditors.
#3 A Bankrupt Can Buy An HDB Flat (As Both Owner Or Occupier)
Marrying a bankrupt would not affect your ability to buy a resale or BTO HDB flat together. The Official Assignee’s consent is not required if you are purchasing a 5 room HDB flat or smaller. If you wish to purchase an HDB executive or maisonette flat, your bankrupt spouse must obtain the Official Assignee’s permission first and prove that you have both the means and needs for such a flat.
Alternatively, your bankrupt spouse may also be included into the flat purchase as an essential occupier. For example, if both of you are below the age of 35, you must form a family nucleus in order to purchase a HDB flat. This can be done as by including your bankrupt spouse as an essential occupier instead of a co-owner. As an essential occupier, your spouse will not be able to contribute to the mortgage nor have any legal rights to the flat.
#4 Your HDB Flat Is Protected From Creditors But Private Property Is Not
According to the Insolvency Office, your HDB flat is protected from creditors as long as one of the owners is a Singapore Citizen. This means that as long as you or your bankrupt spouse is a Singapore Citizen, you do not need to worry about having a roof over your head.
However, you will still need to continue your home loan repayments in order to continue retaining the flat. In general, HDB has a range of financial assistance measures for people who have trouble repaying their HDB housing loans and you should approach HDB directly for more information.
If you own a private property with your bankrupt spouse, the private properties, HUDC and Executive Condominiums are not protected from creditors and could be seized as part of the assets used to repay creditors. Whether your family home will be used to repay creditors will be determined during the bankruptcy process.
#5 Bankrupt’s Family Is Not Liable For His Debts After Death But His Estate Is
According to the Probate and Administration Act, the debts of bankrupt will be settled by his estate upon his or her passing. The family of a bankrupt does not directly inherit the debt.
If the deceased’s estate has more assets than liabilities, his or her estate may be used by the executor to settle his debts. However, if the deceased’s estate has more liabilities than assets, the repayment of funeral, testamentary and administration expenses shall have priority. After which, the order of repayment of debts will be distributed according to the schedule Insolvency, Restructuring and Dissolution Act 2018.
If there are insufficient assets, the beneficiaries of the estate will not be liable for the debts. It is likely that the debts will have to be written off by the creditors.
Do note that CPF monies of the deceased bankrupt are protected from creditors and will be distributed directly to the beneficiaries. However, CPF monies which are invested via the CPF Investment Scheme (CPFIS) are not protected and will be used to repay creditors.
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