Borrowing with a partner, relative or friend can seem to split the risk, but in law a joint credit agreement usually does the opposite. This guide summarises Citizens Advice pages on debt liability, separation and bankruptcy, which state they apply to England, and the ICO’s guidance on credit files. Scotland, Wales and Northern Ireland have their own versions of that advice, so readers elsewhere should check them. It is general information, not legal or financial advice.
What joint and several liability means
Citizens Advice says that if a credit agreement is signed with someone else, both signatories are jointly responsible for repaying it. If the other person stops paying, the creditor can require the other borrower to pay the full amount, not just their share. The term for this is “joint and several liability”. Citizens Advice lists overdrafts, credit card debts and hire purchase agreements among the debts that may be shared.
A debt owed only in one person’s name is that person’s own. Citizens Advice also notes that an authorised additional cardholder, such as a spouse or partner, cannot be asked by the card company to repay debts on the account, which remain the main cardholder’s responsibility. A guarantor is in a different position again, covered in the guide to guarantor loans.
When a relationship ends
On separation, Citizens Advice says a shared debt means both people are responsible for the whole amount, so if an ex-partner stops paying, the other person has to settle it. It advises making a plan for paying shared debts even while the former partners are still talking, and speaking to a solicitor if there is concern that the ex-partner cannot or will not pay.
For a joint bank account, the advice is that continuing to use it is possible, for example while sharing childcare costs, but closing it and opening separate accounts is probably better. The bank might need the partner’s permission to close it, and if it stays open the partner could access the funds or run up debts for which the other account holder is responsible. If the joint account is overdrawn, Citizens Advice says it can be frozen without the partner’s permission, which stops both people withdrawing money and building up debt.
If one borrower becomes bankrupt
A bankruptcy order restricts how creditors can enforce qualifying debts against the bankrupt partner, but release from most bankruptcy debts normally occurs on discharge, subject to exceptions. Citizens Advice states that the other borrower remains liable for the full amounts, and creditors can pursue that person for the whole sum, so a joint borrower can remain liable for the whole outstanding joint debt. Get advice on the particular debt and jurisdiction. The page adds that where a partner took out joint debts without the other’s knowledge, liability may be disputed, but the person would have to show they did not sign the credit agreement. If they did sign, there may still be another reason they are not responsible. The process is outlined in the guide to applying for bankruptcy.
Credit files and financial links
The ICO explains that when two people have a joint account or are named on the same mortgage, they become financially “linked” at the credit reference agencies. A lender considering an application from one of them can look at the other’s credit file as well, in the same way it could for the applicant, because the lender is considering their circumstances as a couple. The ICO says people should only be linked to someone they hold a joint account with or, in some situations, someone they guarantee, and not merely because they share an address. When a joint account is closed, the ICO says a person can write to the credit reference agencies to request disassociation from the other individual, and that an inaccurate or unknown link should be raised with the agency.
The ICO also warns that when credit is taken out in one person’s name for another, such as a mobile phone contract, a default will appear on the file of the person named in the agreement, not the person who uses the service. More on correcting entries is in the guide to errors on your credit file.
Time limits and joint debts
Citizens Advice gives the usual time limit for most debts as six years from the last written acknowledgement or payment, after which a debt may be “statute barred” if the creditor has not gone to court. For debts in joint names it says that if one borrower writes to the creditor the limit is reset just for that person, whereas a payment by either resets it for both. The wider rules are in the guide to time-barred debts.
FAQs
Am I responsible for half of a joint loan?
Not in the creditor’s eyes. Citizens Advice says the creditor can require the full amount from either signatory if the other stops paying.
Does a partner’s bankruptcy end my liability?
No. A bankruptcy order restricts enforcement against the bankrupt partner, and release from most bankruptcy debts normally comes on discharge, but Citizens Advice says the other borrower remains liable for the full amounts. Free help is described in the guide to free debt advice.
Can I be linked to someone I only live with?
According to the ICO, financial links should arise only from joint accounts or guarantees, and not merely from sharing an address.
The bottom line
In England a joint credit agreement makes each borrower liable for the whole debt, so a partner’s departure, bankruptcy or refusal to pay leaves the other borrower exposed. Freezing an overdrawn joint account, planning shared repayments, closing joint accounts and asking the credit reference agencies to remove links after a split all reduce the risk. A payment by either borrower resets the six-year time limit for both. Free debt advice and, for separating couples, a solicitor can address a specific situation. This is general information, not legal or financial advice.
Sources
- Check if you have to pay a debt (citizensadvice.org.uk)
- Dividing up money and belongings when you separate (citizensadvice.org.uk)
- Joint debts and belongings if your partner is bankrupt (citizensadvice.org.uk)
- Credit (ico.org.uk)