What are Joint Debts ?

Joint debts are when two or more people sign an agreement for credit or a loan together, or some other form of agreement for goods or services to be provided for the benefit of all parties.

Usually all parties are liable for the full amount of the debt. This is called joint and several liability.

Just because two people sign the agreement, it does not mean that each is liable for half the debt. If one person can’t (or won’t) pay, then creditors almost always will pursue the other for the full amount outstanding.

It does not matter what the purpose of the loan was for or who spent the money borrowed.

It does not matter who is, or has been, making repayments.

You are not liable for anyone else's debts unless you co-sign a credit agreement or are acting as guarantor for any loan or other agreement.

Just because you are married, have a civil partnership with, or live with someone and share financial responsibilities, you are not usually liable for debts solely in the other person's name.

If the debt is a joint one, it does not matter if the cause of the debt is your partner's financial irresponsibility. In the eyes of the law you are both legally responsible for the settlement of the entire debt.

Joint Credit Card Debts

There is often confusion with regards who is liable for credit card debts.

If the debts are on joint credit cards, then it does not matter whose card was used as the underlying credit agreement is signed by both card holders. Both are equally liable for the joint debt.

However, this reflects the minority of cases.

More often, the credit agreement is with a primary cardholder, who has requested an additional card for their spouse/partner. An additional cardholder is simple given the facility to use the the primary card holder's credit. All debts are in the primary cardholder's name. I does not matter which card is used.

Joint Liability & IVAs

In the case of joint debts, where one party enters an IVA, creditors could chase the other party for the outstanding balance of all and any such debts. If there is a high level of joint debt then it may be appropriate for both parties to enter into separate IVAs.

If a proportion of your debts are joint with your partner, then you can enter into a joint or linked IVA. The IVA process is the same as a single IVA proposal except that income and expenditure assessment takes into consideration the combined income and combined costs of living.

Whether this is right for you is entirely dependant on your specific circumstances – so please call us for advice.

Linked IVAs

When both parties qualify for an IVA due to individual and joint liability debts a linked IVA proposal can be made.

The IVAs will be linked together so that you can't have a situation where one partner's IVA gets approved and the other IVA is rejected - both have to be approved to proceed.

The costs of running two domestic partners' linked IVAs depend on the terms of the IVA proposal and on both the fees charged by your IVA provider. (Abacus’s partner ClearDebt are the IVA company with the lowest fees in the market place) and conditions imposed by your creditors. With ClearDebt, minimum levels of debt and repayment should be the same in a linked IVA as in individual IVAs. Other providers of IVAs may vary.

Joint debts but only one party qualifies for an IVA

Here we consider the case of total debts of £30,000.

You have debts of £20,000 and your partner has debts of £5,000. There is an additional joint debt of £5,000.

You qualify for an IVA but your partner does not.

In this case, you can propose an IVA in your name for the £20,000 of debts solely in your name. The household budget will have to allow for your non-IVA partner to continue making their monthly debt re-payments, including those on the joint debts, in full.

In this case, with a relatively low joint debt (just a sixth of the total) this could be worthwhile, if joint income and surpluses allow. However, if the joint debts represent a higher proportion of the total debt, an IVA may not be the most appropriate solution. Again, you should seek specific advice from us.

More advice on Joint Debts

Insolvency and joint debts, especially where the parties also have non-joint debts, can be complicated. No two cases are ever the same.

For clear advice specific to your own circumstances, please call us. Our advice is free. We have vast experience of proposing IVAs for joint liability debts and will advise if this is a possible debt solution for you and your family.