Our research released this week shows that almost one in five of us Brits are unaware of our legal responsibilities when it comes to joint debt. When you take out a joint loan with someone else you might think that you are signing up for only 50% of that debt or worse still our research has shown that some people mistakenly think they are only responsible for their own individual expenditure.
When you sign up for a loan you become jointly and severably liable. This means you are signing up for being responsible for the whole loan in the event that the other cannot or won’t make the repayments. Therefore in the event of defaulting on the loan the creditor will seek repayment of the whole loan against whichever party they think is more likely to be able to repay the loan. In the UK credit cards cannot be taken out jointly. You can however provide you partner with a card on your account. If you are the main cardholder then you are responsible for the debt, regardless of whether it was your expenditure or not.
In the event of a Relationship Breakdown if you are not named on the debt you may still find yourself responsible for it. In the event of a divorce the court may consider it fair for you to share the debt and either make an order for a lump sum payment from your assets to pay off the debt or make provision for monthly payments from your income. The law is different for unmarried couples and unless it can be shown that the debt was specifically incurred for property related expenditure you won’t be responsible for the debt.
What can you do to protect yourself?
Firstly you can check your own credit report. This will provide a list of your credit accounts, the dates they were opened and your credit limits. The report will also give details of any late or missed payments and details of any people financially linked to you, this meaning someone you have taken out joint credit with. You can get your credit report from Experian, Equifax or Callcredit. If you find that your other half has not been managing your finances then you may want to speak to a debt advisor together to see if you can agree a way forward.
If you are an unmarried couple you can enter into a living together agreement setting out responsibility for the debt and if you are married you can enter into a Post Nuptial Agreement. For further advice call free-phone 0808 175 7872 or contact us online.