Insolvency options for partnerships


A partner can be an individual or a company. Each partner is personally responsible for any debts that the business runs up.

Personal bankruptcy

If a partner can't pay their debts, they could become bankrupt. If they apply to be made bankrupt without winding up the partnership, the remaining partners can continue trading. The debt will be written off for the bankrupt partner, but a creditor can pursue the other partners for the whole debt.

A creditor can also apply to have:

  • one of the partners to be made bankrupt, without winding up the partnership
  • the partnership wound up without action against individual partners
  • the partnership wound up and bankruptcy orders against the partners

The trustee in a bankruptcy can make a claim against the partnership estate. They can take possession of any assets, sell them and distribute the proceeds to creditors. If, however, the remaining partners pay off the joint debts, then they may have a claim in the insolvent estate instead.

Joint bankruptcy petition

Partnership members can present a joint bankruptcy petition to the court. Once bankruptcy orders are made this dissolves the partnership. Both individual and partnership debts are included in the bankruptcy.

Limited liability partnerships

In a limited liability partnership (LLP) the situation is similar to that for the insolvency of limited companies.