Each time you take out credit with another person or put your household bills in both names, you’ll be taking on joint debts. But how does this type of debt work and what happens if one, or both of you, fall behind with your payments? Read on for our guide.
What are joint debts?
Joint debts happen when you borrow money or choose to enter into a financial agreement with someone else. This includes joint loans, credit arrangements, and bank accounts as well as rental agreements, mortgages, council tax, water, and utility bills that are in more than one name. Joint credit cards aren’t available in the UK.
When you take out a joint debt with another person, you’ll both be responsible for the full amount of the loan or bill, not just your share or half – this is known as joint and several liability. It’s also important to remember that, with a joint debt, you agree to cover the full amount, even if the other person stops paying.
How can a joint debt affect my credit score?
A joint debt officially connects you to your co-signer. This is known as a financial link and will be listed on your credit report. As both your credit files are linked and accessible to lenders, the other person’s financial behaviour may affect your ability to secure credit in the future, even if you’re applying for a loan in your name only. No matter whether one or both of you misses a joint debt payment, it will likely be marked as a missed or late payment on both of your credit files and could affect your credit score.
That’s why it’s important to do your research ahead of taking out a joint debt and make sure you know the details of your partner or family member’s financial history before you sign on the dotted line.
What happens to joint debts after a separation?
Many joint debts are shared by couples. In fact, joint financial agreements are often seen as part of the natural progression of a relationship, especially if you choose to move in together or buy a house. However, couples don’t automatically become financially linked, even if you get married. Any individual debts will stay separate, and you won’t necessarily become responsible for your husband or wife’s debts even if you live at the same address.
Unfortunately, circumstances change, and relationships can come to an end. Breakups are hard, and joint debts can make the breakdown of a partnership even more difficult. In fact, a survey by Lowell found that 45% of people said that paying off debts accrued by a partner was the most stressful part of ending a relationship.
Joint debt management will depend on the quality of your relationship post-breakup. If you’re on good terms and still in contact, you might be able to make an agreement that works for both of you. However, if the split was acrimonious and you’re no longer on speaking terms, it may be more effective to seek professional debt advice to understand your options.
What happens to joint debts after a death?
When it comes to joint debt, the death of one borrower doesn’t wipe the slate clean. Instead, the remaining borrower will be responsible for the full remaining sum. You’ll also be responsible if the other person becomes bankrupt and is unable to make payments.
What can I do if I’m falling behind with my joint debt repayments?
There are several reasons why one or both borrowers might fall behind with joint debt repayments. If one of you has lost their job or had a change in circumstances that means they can’t afford payments, for example, or you have separated and one of you is refusing to pay.
In that case, while the bank or lender that issued your loan will probably contact your ex-partner and request payment, they’ll still expect the monthly payment to be made in full. They also can’t force your ex-partner to pay their share but might allow you to put restrictions on existing joint accounts so that the other person can’t add any more debt.
If you’ve been left responsible for paying the full amount of any joint debts, contact the creditor directly and seek expert debt advice. Aim to cover your priority debts first, such as your rent or mortgage payments, council tax, gas and electricity bills, car finance, child maintenance, and secured loans. When struggling to make repayments, there are several debt solutions available that could suit you and your circumstances. You might be able to enter into an informal debt management agreement with your creditors or choose a more formal solution such as an Individual Voluntary Arrangement (IVA).
If you’re looking for joint debt advice, our friendly team of experts is here to help. Give us a call on 0161 8260 585 or send a message here
