Bankruptcy and the family home—equity of exoneration, anti-avoidance and re-vesting
Bankruptcy and the family home—equity of exoneration, anti-avoidance and re-vesting

The following Property guidance note provides comprehensive and up to date legal information covering:

  • Bankruptcy and the family home—equity of exoneration, anti-avoidance and re-vesting
  • Equity of exoneration
  • Anti-avoidance
  • Re-vesting in bankrupt after three years
  • Policy of Official Receiver

Equity of exoneration

Where the property of a spouse is charged in order to raise money for the payment of the first spouse’s debts or otherwise for his or her benefit, it may be presumed in the absence of evidence showing an intention to the contrary, that the second spouse meant to charge his or her property merely by way of security, ie as surety. Therefore, the second spouse is entitled to be indemnified and ‘throw’ the debt onto (to be ‘exonerated’ by) the first spouse as principle debtor.

This principle also applies where jointly-owned property is charged to secure the indebtedness of one co-owner.

On a sale, the sum due under the charge is deducted from the first spouse’s share of the equity. None of the second spouse’s share will be used unless this is insufficient to discharge the debt. The burden of establishing the equity of exoneration falls on the spouse asserting it.

The joint owner is not only entitled to be indemnified by the other joint owner in relation to the relevant debt but the right to an indemnity carries with it a proprietary right over the indemnifying party’s share in the property. Thus, the party with the benefit of an equity of exoneration has not only a personal claim but is also a secured creditor in relation