Liability for debt is a topic that affects millions of people in the UK, and it’s essential to understand who is responsible for repaying debts, especially when it comes to joint debts. Joint debts are debts that two or more people have taken out together, and they are equally liable for the repayments.
Failing to repay debts can have severe consequences, including damage to your credit rating. In this article, we’ll explore the intricacies of liability for debt, focusing on different types of debts, including joint debts, and what happens if repayments are not made on time.
Who is liable for my debt?
You cannot be asked to pay for a debt that you are not linked to or liable for in any way, a court cannot order you to take liability for someone else’s debt. However, there are some ways in which someone else’s inability to pay their debt can impact you and the household. A couple of examples are:
- If at some point in the past that person had given a gift of money, or property, to you and at some stage, they are made bankrupt, there is a possibility that you will be asked to return the gift to enable it to be paid into the bankruptcy.
- It could be that bailiffs are used to recover the debt and if they enter the property to list goods then jointly owned goods may be affected.
- If a credit card is in your name but you let your partner use it, the liability for the debt on the card is yours, as you gave them permission to use it. The same is the case if your partner is a secondary cardholder.
- If you are living in a property, but your partner is the named account holder on the gas and electricity bills. You may become liable for paying the bills, if your partner leaves the property, as you have been living in the property.
If your debts are passed on to a debt collection agency, you will still be liable to pay off these debts. You may need to contact the collection agency to come to a suitable arrangement to make your payments.
Please note, if you are a parent it is likely that you will have to pay any debts for your child if they are aged 17 or under.
What is joint debt?
Joint debt refers to a type of debt that is taken out by two or more individuals. In other words, it’s a debt that two or more people are jointly responsible for repaying.
When individuals take out joint debt, they are equally liable for repaying the debt, and each person is responsible for the entire debt. This means that if one person defaults on the debt, the other person is still responsible for repaying the entire debt amount.
Common forms of joint debts
There are several forms of joint debts that can cause problems for people down the line. Below are some of the most common examples.
Jointly liable mortgages
When two or more people take out a mortgage together, they are equally responsible for making repayments to the loan secured against the property. If one person is unable to contribute to the repayments, the others are still liable for the full amount.
In the case of a mortgage shortfall, where the sale of the property does not cover the full amount owed, all parties are responsible for the remaining debt.
Joint rent arrears
If two or more people rent a property together, they are jointly responsible for paying the rent. If one person falls behind on payments, the others may be pursued for the outstanding rent arrears.
Household bills for a shared home
This includes bills for utilities such as water, gas, and electricity. If these bills are in joint names, all parties are responsible for paying them. If one person does not pay their share, the others may be held responsible.
Joint credit cards
When two or more people are named on a credit card account, they are jointly liable for the balance owed. This means that if one person is unable to pay their share, the others are responsible for the full amount.
Other shared credit agreements
This includes joint overdrafts or loans. All parties are equally responsible for making repayments, and if one person defaults, the others may be held responsible for the debt.
Who owns the debt liability for joint debts?
Joint and several liability
For joint debts, the ownership of the debt liability is shared equally among all parties involved. This means that each person is responsible for the full amount owed and not just a portion of it. This is known as joint and several liability.
Joint and several liability means that if one person is unable to pay their share of the debt, the other parties are still responsible for the full amount owed. In other words, the creditor can pursue any one of the parties for the entire debt amount, rather than just a portion of it.
For example, if two people take out a joint loan and one person defaults on their repayments, the creditor can pursue either person for the entire debt amount owed. This puts all parties at risk, and it’s important to understand the potential consequences of joint and several liability before entering into any joint debt agreements.
How long will I be liable for my debt?
In the UK, the limitation period for collecting debts depends on the type of debt.
For unsecured debts, such as loans, credit cards, and catalogue debts, the limitation period is typically six years. This means that the creditor has six years from the date of the last payment or acknowledgement of the debt to take legal action against you for the outstanding amount.
For mortgages, the limitation period is longer at 12 years, as it is considered a secured debt that is secured against a property. This means that the creditor has 12 years to take legal action against you for any outstanding mortgage debt.
Council tax is a bit different, as it is technically pursuable indefinitely. This means that the local authority can continue to pursue you for any remaining debts, regardless of how long ago they were incurred.
However, they may be subject to certain limitations on how far back they can go in terms of recovery action.
It’s important to note that these limitation periods can vary depending on the specific circumstances of your debt and your location, so it’s always best to seek professional debt help if you’re unsure about your liability for a particular debt.
How long am I liable for debts that are subject to court action?
If a creditor has filed court papers against you or you have a CCJ registered against you there is no time limit on the debt. You must repay it. If you had a contractual agreement to pay this debt and the debt has not been settled then the debt is still due.
If the debt is in dispute then it remains payable until otherwise agreed, whether by court order or by the company agreeing to waive the debt.
Am I liable for my partner’s debts if we’re married?
The short answer is no. Your husbands’ creditors can not chase you for his debts. Even if he defaults on his repayments, they can not touch your property or take your money to repay his debts. They will only pursue you for his debts if the debts were in joint names.
Please note if your husband’s name appears on your credit file, this means that you are financially connected in some way. This means his debt can affect your credit ratings.
If you feel that your finances are totally separate from your husband’s, you should immediately remove his name off your credit file. This way his debt cannot affect any future mortgage applications you make.
Will I lose my money because of my spouse’s debt?
The short answer should be no. But if the debts are very serious then your spouse could lose their assets – including their share of an asset held in joint names with you. It might be possible for a creditor to take a charging order on the marital home for example.
Most married couples plan their monthly finances together and it would make financial sense for you to help your spouse as much as you can.
The same would be true if your spouse was self-employed and not paying tax. You are not responsible for someone else’s personal tax responsibilities and ordinarily, you would not have knowledge of a self-employed person’s accounts to know if they have any tax liability.
If you believe someone is trading, or running a business, but aren’t paying tax on their profits then you can take further guidance on reporting here.
Can an unpaid debt or credit agreement be separated?
Sometimes with couples or spouses, you may have a personal agreement to pay a certain percentage of the debt. Since this agreement was between yourselves and the lender has not been involved in this decision. This means the original agreement has not changed.
As far as the lender is concerned you still have full liability for the debt and the other parties involved still have full liability for the debt.
Your arrangement to repay the debt may mean that you will reach a point where there is no more to pay, all parties have made their payments. Or you may reach a point where you have paid your percentage and the rest is still outstanding and the lender will still see that legally you have liability for the debt.
Please note, it is always wise to review your payment plan on a regular basis, especially after changes of circumstances.
Am I still liable to pay debt if I have Payment Protection Insurance?
If you have Payment Protection Insurance (PPI) and are unable to make repayments on your debt due to illness, accident, redundancy, or other qualifying circumstances, the insurance policy may cover your repayments for a set period.
However, it’s important to note that having PPI does not automatically absolve you of your obligation to repay your debts. You are still liable to pay your debts, and the PPI is intended to provide you with temporary financial support during a period of hardship.
The exact terms and conditions of the PPI policy will depend on the specific policy and provider, so it’s important to read the policy documents carefully and understand what is covered and what is not.
If you have concerns about your ability to make repayments on your debts, it’s important to contact your lender as soon as possible to discuss your options.
Do I have do repay money owed to loan sharks?
In the UK, loan sharking is illegal and considered a criminal offence under the Consumer Credit Act 1974. Therefore, borrowers who have taken out loans from loan sharks do not have a legal obligation to repay the debt.
However, while there is no legal obligation to repay the loan, it is still important to address the issue as soon as possible. Loan sharks often use illegal and intimidating tactics to collect repayments, which can put borrowers at risk of harm or violence.
If you have taken out a loan from a loan shark in the UK, you should seek help and support from a reputable debt advice agency. They can provide you with advice on your rights and options, and help you to report the loan shark to the appropriate authorities.