Am I liable for my partner’s debt?

May 15, 2015

Liability for a partner’s debt depends on whether the borrowing is in joint names or your partner’s sole name. In essence, if the debt is in their sole name you cannot be held liable unless you have acted as guarantor when the loan was taken out.

Acting as guarantor for your partner means making a personal guarantee that you will meet loan repayments should they fall behind. If you are a guarantor for any of your partner’s borrowing, the creditor will look to you for payment should they be unable to recover the money from your partner.

Joint liability
In the case of loans with joint names, you will be held ‘jointly and severally’ liable for the debt. This means that if your partner is unable to afford the loan repayments at some point, the full outstanding amount will be your responsibility.

Being jointly and severally liable applies to bank overdrafts as well as personal loans. If the account is held in joint names, there is no escaping your responsibility should your partner be unable to make repayments.

Credit card and store card accounts
Being an additional cardholder on your partner’s credit or store card does not make you liable – as the account is in your partner’s name, they are responsible for repaying any outstanding balance.

Unfortunately, the reverse is also true – the inclusion of a partner on your credit or store card account means that if they run up debts that they cannot afford to repay, the responsibility lies with you to bring the account to order.

Mortgage arrears
Again, the crucial factor is whether the mortgage loan was taken out jointly or in your partner’s sole name:

In joint names
If your mortgage is in joint names, you continue to be responsible for repayments even if you have moved out of the property. Should your partner fail to make the required payments, the full outstanding amount remains a joint liability.

In your partner’s sole name
When considering arrears on a mortgage in your partner’s sole name, you will not be liable for the debt but may face eviction by the lender should they attempt to recover their money by repossessing the property.

Further consideration has to be given to the fact that a creditor may make a claim regarding your ‘beneficial interest’ in a property. This could happen if you have contributed financially to its upkeep or household bills on a regular basis.

The length of time it takes to build up ‘beneficial interest’ in a property is complex, however, and each case is viewed differently by the courts.

Rental agreements
Joint rental agreements work in much the same way as a mortgage, in that you are responsible for the entire amount of rental outstanding and could be evicted by the landlord in an attempt to control their losses.

A damaged credit rating
If you have any history of joint borrowing with your partner, their debts could adversely affect your credit rating simply by association. You can contact the main credit reference agencies to request ‘financial disassociation’ if there is no outstanding joint borrowing, and you no longer reside at the same address.

It is important to contact your utility companies and local council if you have moved out of a property previously shared with your partner, as you may be held responsible for paying these bills if they are not informed.

Responsibility for joint debt secured on an asset can be a complex area. Get professional advice from Scotland Debt Solutions – we will help you understand your financial situation and responsibilities.

John Baird

Insolvency Adviser

Tel: 0800 063 9250

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