Credit Building > How are joint bank accounts treated in a bankruptcy?

How are joint bank accounts treated in a bankruptcy?

Wollit Team2 minute read · Updated 30th June 2024

Sharing a joint account with someone going through bankruptcy can have serious effects onyour credit score. Here is how it works and how you can protect yourself.

What happens to a joint bank account during a bankruptcy?

Once a bankruptcy order is made, the bank account is frozen to prevent any further transactions. This means that no new payments can be made into or out of the account.

The official receiver will then assess the account balance and decide how to distribute it.

The non-bankrupt account holder may also be able to keep some or all of the balance, depending on the situation.

The official receiver usually divides the account balance equally between the bankrupt and non-bankrupt account holders.

However, if the non-bankrupt account holder can show that they contributed significantly more to the account, they may be able to keep more than half of the balance.

Can sharing a joint account with someone going through bankruptcy affect my credit score?

Bankruptcy can significantly affect credit scores in the UK. The bankruptcy will remain on the credit file of your partner for six years from the date of bankruptcy, making it very hard to get credit during this period.

It can also affect your credit score if you’re the non-bankrupt account holder. This is because when you open a joint account with someone, you create a “financial association” with them.

This financial association will stay on your credit file until you close the joint account and let the credit reference agencies know that you want to remove it. Until you do so, lenders will look at both your credit files when you apply for credit.

If you’re the non-bankrupt account holder, then you should set up a new account as soon as possible, for a few reasons:

So you can close the joint account and remove the “financial association” with the bankrupt partner.
To move your direct debits which were paid from the joint account to the new one. This could help you avoid mist payments, which could hurt your credit score.
If you attempt to access the frozen account, it can lead to legal complications.

This new account will not be affected by the bankruptcy and will allow both of you to manage finances independently.

Once you've opened the new account and moved over the direct debits and standing orders you should talk to your bankrupt partner and close the joint account.

Once you've closed the joint account you should contact each credit reference agency (Experian, Equifax, and TransUnion) and send over a Notice of Disassociation. This is a short note that informs them that the joint account is closed and that you want to remove the financial association.

You should also keep in mind that you don't need to end the relationship with the bankrupt partner. For example, if you open a joint account with your spouse, you don’t need to divorce them in order to remove the financial association.

You can still close the joint account, send the notice of disassociation to the credit reference agencies, and continue staying happily married. Your partner might even be happy to do this, as it can protect your credit score.

I used to share a joint credit account with my partner. How can I continue building my credit score if I close it?

If you used to share a joint credit account with your partner, such as a credit card with two card holders or a joint current account with an overdraft line, closing it can both temporarily lower your credit score and leave you without a way to regularly build credit.

Luckily, now there are many apps that can help you build and improve credit.

One such app is Wollit. Wollit is an app available both on Android and iOS, and it works by reporting a fixed-fee monthly subscription as a loan repayment to all three credit reference agencies.

This gives you a chance to continue building your own credit history and improve your credit score without the fear of financial associations and without having to be linked with someone else’s credit rating.