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Love and Debt
June 24, 2009 by DebtGeniusNo Comments Tweet this post
Love and Debt
The end of a relationship is painful enough but once the hearts and flowers have disappeared, the last thing you want is debts and bills. Half of all marriages in Britain now end in divorce - and that means financial misery for many. In fact, the monetary cost of splitting may even exceed the emotional pain. There are ways to minimize the financial hurt, but because two cannot live as cheaply as one, separating your financial relationship simply and quickly should be a priority.
If you have taken out a credit agreement, loan or have a bank account in joint names then you are both liable for the full amount of any debt. This is known as ‘joint and several liability’ and also applies to rent arrears on joint tenancies, arrears on joint mortgages, council tax payments and water charges on properties that have been jointly occupied. The key thing is whether or not you signed a joint agreement. Generally speaking, you are not liable for your partner’s, or anyone else’s debts, unless you signed an agreement or acted as guarantor. The two main exceptions to this are council tax and water charges. It is worth noting that regardless of the terms of your divorce settlement, creditors will still pursue you both for outstanding debts in both your names, even if one of you agreed in writing to pay them off.
Don’t bank on it
For starters, that joint account might have seemed like a caring sharing move but if you reach the stage where you cannot trust your partner then it could give you cause for regret. Limitless, single-signature withdrawals mean that the account could be drained by either one of you leaving the other with a nasty shock. Worse still, if one partner goes overdrawn on the account then both of you are liable for the debt. It may not be as romantic but many couples opt for the ‘three pot’ system for this very reason, keeping their own individual accounts and having a third joint account for the mortgage and shared bills. If your relationship breaks down, you can then close the joint account and advise your bank on how bills will be met in the future.
For similar reasons, separate savings accounts give you each more control and in a modern age of internet banking, transfers can be made between accounts in a few seconds, when needed.
Remember that if you do decide to have joint accounts which then need closing, the bank or building society is not obliged to convert the joint account into a single one or offer you a new account of your own if they feel that your financial position is not sound.
Credit with some sense
Think twice before you allow your partner to share your credit card account. Remember that you, not they, will be legally liable for all the transactions - and debt. If you apply for any loans or credit in both names and your partner skips town then you will be the one faced with paying back the money.
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Filed under Debt Management
Tags: Relationship Debt
