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09.08.2016

Your debts and your partner

Your debts and your partner

One of the biggest worries a lot of our clients have when they first talk to us is whether their debts will affect their partner.  Many of our clients have not discussed the extent of their debts with their partner because they are worried about the effect it might have on them or on their relationship.

Other clients are worried about how being in an IVA or a Trust Deed might affect any future relationship that may start during the term of their plan.  There are plenty of myths associated with relationships and debt and we thought it would be useful to explain everything you need to know about how your debts could affect your partner and how theirs could affect you.

Marriage and debt

Many people believe that when you get married, your spouse will become liable for your debts and your credit records will be linked to create a joint file.  Neither of these is true.  Only joint credit will link you and your spouse together so marriage alone is not enough to affect your credit rating.

Another common myth associated with marriage is that once a partner changes their last name, their credit history is deleted and their file starts again.  This is also not true.  If you change your name you simply have to notify us and we will inform your creditors of the change.  Your credit history will remain the same, the only difference to your file will be your new name which will have been added as an alias.  If it is your partner who has changed their name then they will have to inform their creditors of their name change in order for it to appear on their file.  Only once creditors have updated their information will their credit record change to reflect this.

Joint debts

Whilst marriage is not enough to link you and your partner’s credit files, joint credit applications will make an association between you and your partner.  Whether you open up a joint account, or get added to an account with your partner, all of these scenarios will join you and your partner together, so any default on your file can affect your partner’s file.  When you establish a joint account your partner becomes a financial associate and will be named as such on your file.  Your partner’s creditors may choose to look up your file and your history could affect any future credit applications that your partner makes.

Secret financial lives

Despite the effect that one partner’s debt can have on the other’s ability to access loans or services, a surprisingly high number of people fail to discuss their debts with their loved ones. Research has shown that 80% of people wouldn’t tell their partners about their debts because they were worried about how they would react.

Financial privacy is one thing, but if secret debts threaten the stability of the whole household then it can be a real issue – and can be an added strain on a relationship.  Before linking finances with a partner it is important that you both know about each other’s credit history.

Could you be liable for your partner’s debts?

One thing that scares a lot of people is whether they are personally liable for their partner’s debts.  For the most part, you can only be held responsible for debts that are in your name or held jointly in your name – so for instance if you have a joint bank account with an overdraft or a loan on joint names then you will both be liable.

Credit cards are a different story.  Legally a credit card can only ever be in one person’s name.  A lot of credit card companies offer a second card on the account for the account holder to give to a partner and the card will show the partner’s name, but that does not mean that they become liable for the balance due on it.

If you and your partner are jointly liable for any debts then that doesn’t mean you owe just half of the money each – the creditor can demand that you repay the full amount if they can’t get it from the other account holder.  For our clients this means that the creditor can still request payment in full of any joint debts from your partner despite the debt being included in your IVA or Trust Deed.

Clearly a creditor cannot be paid more than what they are owed so if your partner pays the debt in full they cannot continue to receive payments from us as well.  Likewise, any payments that have already received from us must be taken into account when asking your partner to pay the balance.  The law allows for a partner who has paid a debt in full to claim for half of the amount they have paid in your IVA or Trust Deed by what is known as a subrogated claim, so if your partner has done this they should let us know and we can add them to your plan so that they receive dividends along with your other creditors.

There are some household bills like council tax where a partner can be considered liable if they’ve been living in the property for a period but for the most part, debts in your sole name remain solely your responsibility and no liability can fall onto your partner.

If you need more information about the options available to you in dealing with your debt, you can always speak confidentially with one of our friendly advisors on 0808 2085 198.