If you borrow money with someone else, it’s a joint debt. Overdrafts, bank loans, and mortgages are common types of joint debt. They’re often (but not always) taken out with your partner. We’re unaware of any joint credit cards. “Additional cardholders” aren’t legally responsible for repayment.
Household bills may be issued in joint names. If you get into arrears with payment, these become joint debts. Common examples include council tax, gas, and electricity.
You have “joint and several liability” for these debts. This means you’re both responsible for the full amount owed. You’re not responsible for 50% of the debt each (this is a myth). If one of you doesn’t pay, the other can get chased for full repayment.
When you first take out a guarantor loan, it isn’t a joint debt. Your guarantor only becomes responsible for payment if you get into arrears. Any arrears become joint liabilities, because the lender can chase you both for payment.
To qualify for a Scottish trust deed you must personally owe at least £5,000. This £5,000 figure includes the full balance of your joint debts. For example, if you have a joint £2,000 overdraft it counts in full towards your £5,000 total. The same applies to your partner; this same £2,000 joint debt also counts in full towards their £5,000 figure.
You can include a joint debt in a protected trust deed. Your liability ends when you complete the process and get discharged. The other (joint) borrower isn’t covered by your trust deed. They remain responsible for payment. A lender will seek full payment of the balance from them.
You cannot choose to leave a debt out of a trust deed in Scotland. They automatically include all of your debts. You can’t opt to keep paying your joint borrowing directly. You could enter a joint trust deed. In reality this is two separate (but coordinated) debt plans. Each of your liability for the debt will end upon your own discharge.
The same principles regarding joint debts apply to other debt solutions. Like trust deeds, bankruptcy is an individual debt solution. Your bankruptcy will not protect a joint borrower. If a couple appoints their own trustee, their bankruptcies can get handled in a coordinated way.
Couples with joint debts may separate or divorce. You might have agreed that one of you will pay the debt. This could be a formal or informal agreement.
These agreements are irrelevant to lenders. If your ex-partner stops paying, the lender will request payment from you. If your ex-spouse or partner enters a trust deed, the lender will still seek payment from you. You remain legally responsible for payment. If you cannot afford the payment, you should obtain debt advice before the situation worsens.
Joint debts can be a complex topic. Your decisions affect the other borrower. This can cause personal conflict and emotional distress. You can choose to deal with the debt together, but you can also proceed separately.
For personal advice, please contact us. We’ll explain your options and how they’ll affect a joint borrower. All calls are confidential and handled by experienced debt experts.