Equity of Exoneration – The Spouse’s Claim

Equity of Exoneration Claim Solicitors

If your spouse has been declared bankrupt, what are the risks to your assets? Can the equity of exoneration arise?

The often-given example of a case of equity of exoneration is where a wife mortgages the family home, together with her husband, as security for his business pursuits. The wife is treated as surety and it would be assumed that her share would not be included against his liabilities. This is not however always the case.

The leading authorities on this doctrine are: [Re Pittortou [1985] 1 WLR 58] and also the more recent case of [Armstrong v Onyearu and another [2017] ECVA Civ 268] which deal with many issues that arise when dealing with property of spouses.

The dispute therefore arises where there is a question as to whether the loan is for the sole benefit of the husband, or also for the wife.

The Spouse’s Benefit

In general terms, the following applies:

• If the loan is for the sole benefit of the partner, the presumption of equity of exoneration will apply.
• If part or the entire loan is used for the joint benefit of both co-owners, the presumption does not apply.
• If the spouse was receiving an indirect benefit, it would appear that the presumption of equity of exoneration will still apply.