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Your Money > Family Finances Articles > Joint finances - don't be dumped with debt
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By Sarah Modlock
Few things cause as much stress and difficulty in a relationship as money. Every year the marriage guidance counsellors at Relate report that finances are at the heart of most the problems couples encounter. Even if one or both of you knows what you're doing with money there can still be bad habits that cause arguments. But worse still is the mess you can be left in if a partner abuses your trust. As credit becomes more expensive and harder to get in the wake of the 'crunch', it is more important than ever for us to protect our credit ratings and be sensible with money. But what would you do if your husband, wife, partner, son or daughter told you they had been turned down for loans and credit cards but that you could help them? If you sign your name on the application alongside theirs or take out a loan or card in your name only for them to use, surely there cannot be any harm in it? After all they are your loved one. Perhaps you are not taking out credit for someone who cannot get it but simply signing up with a partner for a loan or credit deal for furniture or a new car. Before you take the plunge, it is essential to understand the risks of joint credit. The crucial words - joint and several liability When you sign up to joint credit you will be jointly and individually liable for the all the money that is owed. This means that if your partner leaves you and refuses to pay their share, the bank or finance company can and will come after you for the whole debt, not just your share of it. Of course they will chase your erstwhile partner but this will not stop them coming after you at the same time. It may not seem fair, especially if you have not even spent all or any of the money. But this is what you agree to when you sign up to joint credit. So even if you trust your partner 100%, you must still be prepared to pay 100% of the money back if the worst happens. This applies to any credit agreements, loans, overdrafts, rent arrears on joint tenancies and arrears on joint mortgages. 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. It is worth noting that regardless of the terms of a 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. If your partner is made bankrupt, they will be released from the legal responsibility to repay the debt, leaving you fully liable to make the repayments. Your partner's bad money habits could also have a lasting impact on your own credit record. If you are saddled with debt or being taken to court to recover it then black marks will appear on your credit reference file. This will restrict your chances of getting any good deals on credit in the future. Make sure you check your credit files regularly by contacting each of the three main agencies - Experian, Equifax and CallCredit. Dumped with debt - what to do next Don't panic. Make a list of what is owed and be prepared to contact the creditors. The worst thing you can do is ignore letters and phone calls from the creditor or lender. If you did not sign your name to a loan or credit agreement then take action straight away. Debt counsellors at Payplan say that for an agreement to be joint and several then it must be signed by all parties (except for Council Tax). If a lender says you are jointly liable for a debt and you believe this is not the case, ask for a copy of the original agreement. If you have not signed it then you are not liable. Be honest about your debts and seek help. Talk to the creditors and explain the situation. Ask them to freeze the interest and offer them as much as you can afford in regular repayments. Help from one of the UK's excellent, free debt services (details below) could be invaluable. Mortgages are our biggest joint debts - if your partner is refusing to pay their share of the monthly mortgage payments and you are able to pay on your own for a short period, make sure you keep evidence to prove what you have contributed. If you are unable to meet the payments, you should have urgent talks with your lender. They may be able to reduce your payments or provide a payment holiday for a couple of months to ease the transition. Who can help:
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