HELP WITH DEBT
Joint debt in Scotland
HELP WITH DEBT
Joint debt in Scotland
Many people have questions about debts they share with someone else. If you are jointly named on a credit agreement, who is liable to repay the money? What if that person is now an ex-partner? Are you still responsible?
Here, we explore joint debts: what they are, how they work in Scotland, and where to get debt advice if you’re worried about debts you share with someone else.
What is considered joint debt in Scotland?
The simple answer is any credit agreement or financial arrangement you enter into with other people, like a partner, business partner, or family member.
Joint debts are debts jointly entered by two or more individuals, and are therefore owned by each of those individuals. A money adviser or lender will always examine the credit scores of all parties taking on the debt, as each person will be responsible for the amount in question.
What is not considered joint debt?
Credit card debt (additional cardholder)
Credit card agreements do not always count as joint debt. It depends on the type of account you set up – a joint credit card, or a credit card with an additional cardholder.
If you take out a credit card with a partner, and both borrowers have cards that are tied to the same bank accounts, that is considered a joint credit card. You will carry joint liability for any debts or unpaid fees, and it could affect each person’s credit rating.
If you already have a credit card, and decide to add a partner as an additional cardholder, this isn’t a joint debt. The primary cardholder is officially responsible for any missed payments or credit card debts, even if they are accrued by a partner.
Can a wife be responsible for a husband's debt in Scotland?
Similar to the above, your liability for your partner’s debt depends on whose name the debts or credit agreements are in.
If, for example, your husband has loan repayments he is struggling to meet, but the company he borrowed from drafted a credit agreement in his name, it’s a matter for him alone. Legally, he is the only individual liable for the amount owed.
If, on the other hand, you both entered a loan arrangement, and your names each appear on the credit agreement, then you are both liable for the full amount borrowed – not just your share of the debt. Creditors are within their rights to chase you for the full amount.
I’m recently married. Will my debts become joined with those of my spouse?
No. It’s a common misconception that once you’re married, your and your spouse will share a joint credit report.
You’ll still be responsible for any debts you’ve taken out in your own name, before and after your marriage. However, if you do decide to take on debts in both your names and one of you doesn’t have good credit, the other person’s score may be affected.
I’ve split up with my partner or spouse. Am I only responsible for my half of our joint debt?
No, you’re both responsible for the full balance of your joint debt. If one person decides to shy away from their obligation to the debt, the other person will become solely responsible for paying it back.
This is provided for in most, if not all, financial agreements, and is known as ‘joint and several liability’.
If you’ve been left with joint debt, our best advice would be to try to reach an agreement with the other person to repay the debt. We understand this isn’t always possible – for example if your relationship ends on bad terms, or if one side isn’t able to keep up with payments.
In these situations, it can be helpful to reach out to a debt advice specialist.
What happens to joint debts if my spouse or family member dies?
If you have any joint debts with a spouse or family member who has died, the debt will become your sole responsibility. This will also be the case if you were a guarantor for a debt owed by the deceased.
And if you jointly own your home, lenders may try to claim half of any equity in the property to help repay your debts.
Creditors are chasing me for a joint debt I didn’t sign up for, what can I do?
Contact the lender directly and ask them for a copy of the original contract. If it doesn’t contain your signature or you don’t recognise it, it could mean you’ve been a target of fraud.
We can offer you guidance on this, but it’s also a good idea to reach out to a legal professional to make sure you’re getting the best possible advice.
Can joint debt affect my credit score?
In short: yes, it can affect your credit rating. Although your joint debt won’t merge into one credit score, when you take on a debt with someone, your credit reports will become linked and the debt will show up on each one.
There are some positives. If you and your partner are diligent about paying back your joint debts, it can be a good thing for both of you – as it demonstrates that you’re a good risk for lending.
On the other hand, there’s also more risk attached – because if either of you misses a payment or defaults on the agreement, it will affect both of your credit scores. Ultimately, this can be damaging to your credit score – and make it more challenging to get credit in the future.
What's the difference between a joint debt and a guarantor loan?
Guarantor loan debts are very similar to joint debts. The main difference is that they are usually marketed at people with a poor credit rating who would struggle to borrow money from a regular credit company or high street lender.
In a situation where someone enters a guarantor loan, they will have someone else – usually a friend or family member – agree to pay back the money if they can’t afford the payments themselves. That individual is therefore known as the guarantor.
This kind of arrangement is similar to a joint debt in that if one party fails to repay, the other party is responsible, the difference being someone taking on a guarantor loan is likely to have had debt problems in the past, or been subject to bankruptcy or other formal debt solutions.
Can you enter a joint debt solution in Scotland?
Can you do a joint Debt Arrangement Scheme?
A Debt Arrangement Scheme (DAS) is a Scottish debt solution that helps people with over £5,000 in debts to consolidate those debts into a single monthly payment plan using a tool called a Debt Payment Programme (DPP).
It is possible to enter a DAS with joint debts, but the individual you enter it with must be a partner, spouse, or someone you share a home with. It’s important to understand that both parties are responsible for repaying money owed, and each person’s credit file will be impacted.
Can you enter a joint Scottish Trust Deed?
Trust Deeds are the most popular Scottish debt solution. The agreement is set up by an Insolvency Practitioner – a debt professional who will also act as trustee for the arrangement. Trust Deeds transform debts into a single monthly payment over a fixed period, usually four years, after which any remaining debt will be written off.
Joint Trust Deeds don’t technically exist, but you can enter your own Trust Deed at the same time as your partner and have these arrangements jointly managed. This set up means your credit file won’t be at risk should your partner fail to hold up to their end of the arrangement.
Where can I get help and advice about joint debt in Scotland?
If you’ve been left with the responsibility of a joint debt and are struggling to pay it, we understand how you feel.
At Carrington Dean, we’re one of the biggest debt solutions providers in the UK, we help people deal with all types of debt, whether you’re struggling to pay your utility bills, or you’re worried about bankruptcy.
No matter how much money you owe, or how many creditors are chasing you, our money advisers are always on hand to make sure you have the best possible debt advice. Get in touch today for free on 0800 043 1320 and find a way to deal with your debts that works for you.