The relationship may have ended, but the debt is still alive and well. But who is responsible for paying it?
In our day-to-day work CCCS counsellors get asked one question a lot: “It’s over, our relationship has ended. Now who has to pay?”
It might be a straight break-up with one joint loan, or it might be a messy divorce involving numerous properties, children and a tangled web of joint accounts, cards, loans and mortgages. It might even involve the dreaded words ‘beneficial interest’.
A couple of examples we’ve dealt with: in one case a (soon-to-be ex-)wife ran up around £200,000 worth of debt without the husband’s knowledge, and in a second case, one partner wasn’t working but had a generous allowance from the other, yet also ran up debts of around £50,000.
Both were recommended IVAs, but both had an impact on the breadwinner, emotionally and financially.
Above all else, remember this: the bank isn’t interested in who left who, who spent whose money on a new car, or who had it away with whose ex-best friend. They’re not Jeremy Kyle. They just want their money back.
Joint loans
If you take out a joint loan with someone, you’re both joint and severally liable for the repayment of the whole amount.
That means if you split, get divorced or go your separate ways the bank will expect the loan to be repaid in full by the pair of you, or separately. If you decide not to repay the bank they can chase you, while also demanding the full contractual payment from your ex.
Let’s go through it with a few example scenarios for a joint loan of £10,000…
- Scenario 1: Most simply, if you borrowed £10,000 with your partner and your partner passed away, you’d be expected to repay the outstanding amount, up to the whole £10,000 (plus the interest due).
- Scenario 2: If you and your partner borrowed £10,000, and then your partner left you and went bankrupt with no assets and no income, you and you alone would be expected to repay the outstanding amount, up to the whole £10,000 (plus the interest due).
- Scenario 3: If you and your partner borrow £10,000 and then your partner loses their job and has to take out an IVA, their part of the debt is included in the IVA. When the IVA is accepted by creditors, the debt will receive a payment each month through your partner’s IVA but you are liable for all of the rest of the loan. The bank cannot force you to repay more than was owed and even though your partner is making some payment through the IVA, you are liable for the rest of the whole amount borrowed. So if they had to pay 20p in the pound on the loan (20% in other words), you’d have to find the other 80% (plus the interest on that 80%).
The above applies pretty much for any other joint credit product, be it a joint account or secured loan, mortgage or mortgage shortfall. This is joint and severally liable in a nutshell.
Starting a relationship in debt
People often worry about going into a relationship with debt, and how they will explain this to a new partner. This is worsened when the old debt is jointly held with an ex-partner who’s refusing to pay.
Other scenarios include the celebrity fashion of pre-nuptial agreements, which are rapidly catching on with everyday couples who have an uneven split of assets and one party wants to protect their financial interest from the outset.
This all points to the difficulty of mixing love, money and debt. At CCCS we’re used to helping to untangle often complicated debt situations that are often made worse by anger and or resentment towards ex-partners or about lack of trust in relatively new relationship.
Debt advice not marriage counselling
We can’t give relationship advice (although we’ll always be empathetic to your situation); we’re also not the best people to talk to about pre-nups.
However we can help with your debt problems even if they’re tangled up with emotion and heartbreak. If you’re in the midst of a breakup or you’re worried about being left with the debt you should try our online debt counselling service.
It can help find a solution to at least one serious burden at a stressful time.