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If you enter a credit agreement with someone else, you have a joint debt. They’re usually taken out by couples. Common examples include bank loans, overdrafts, and mortgages.
Your household bills might get set up jointly. If you fall into arrears, you’re jointly responsible for payment. This could apply to council tax or utility bills.
Each of you has “joint and several liability” for payment. This means each of you owes the full balance (not half each). If one borrower defaults, the lender seeks full payment from the other.
We aren’t aware of any joint credit cards. The main account holder is responsible for payment. Additional cardholders aren’t responsible for payment.
You can put a joint debt in your debt management plan. The lender gets asked to accept a reduced payment. They’re asked to suspend interest and charges. Creditors tend to agree to fair payment offers.
Some couples enter a joint debt management plan. Both of your debts get included. This includes any joint debts you have.
What if you enter a debt management plan on your own? The lender may accept a reduced payment from you. This will not protect the other borrower. The lender will seek payment from them as per the credit agreement.
Bright Oak is a direct provider of debt management services. Please contact us for personal debt advice and information.
You must include all of your debts in an IVA proposal. You cannot leave a debt out by choice.
Some couples enter a joint IVA. This will address any joint debts you have.
What if you enter an IVA on your own? The other borrower will receive no protection from your IVA. The lender will expect full payment from them.
These principles operate in the same way with trust deeds in Scotland.
All of your debts get included in these debt solutions. You cannot choose to leave one out.
You can get protection if you both become bankrupt or start a DRO.
If you act alone, your partner (or ex-partner) receives no protection. They’ll remain liable to repay the full debt.
What happens to joint debts if you split up or divorce? Some ex-couples agree one of them will keep paying a joint debt.
The lender isn’t bound by this type of agreement. If your ex stops paying a joint debt, the lender will seek payment from you. If your ex enters insolvency, the lender will seek payment from you. Insolvency includes bankruptcy, and IVA, or a DRO. The lender acts upon the credit contract, not your agreement with each other.
Guarantor loans don’t start out as joint debts. The borrower agrees to make the repayments. The guarantor only becomes liable if the borrower defaults.
If this type of loan falls into default, the arrears become joint debt. The lender is seeking payment from the borrower and guarantor.
Read more about guarantor loans here.
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If you’re worried about a joint debt, please get in touch. We can identify solutions for either (or both) of you.
All advice is confidential and provided by qualified debt experts.
Author: Andrew Graveson – Qualified Debt Adviser & Bright Oak’s Founder
Page Last Updated: 19/09/2019