If you are living together, when you are doing a Financial Summary, whose debts, incomes and expenditures do you include? You can’t make much progress with deciding how to tackle a debt situation if you aren’t clear about this. And how should you discuss and manage debts when you are still at the going out stage, not living together?
There aren’t always clear right and wrong answers here – but this page may give you some pointers towards finding out what will work for you and for your partner!
You are not legally responsible for your partner’s debts, assuming they aren’t joint debts and you haven’t acted as guarantor. It doesn’t matter whether or not you are living together nor whether you are married or even if you own a house together – although that latter situation gets pretty complicated.
If you have any joint finances (joint mortgage? joint bank account?) then one partner’s credit rating will be affected if the other partner defaults on their debts. So if one of you has debt problems and the other hasn’t, it is probably a good idea to avoid joint accounts. Even if you want to help your partner out with their debts, keep your own finances separate so at least one of you can have a good credit rating.
We both have debts, mostly run up together, and both want to tackle them
The simplest approach here is usually to do a joint Financial Summary – all your incomes, expenditures and debts and then follow through the flowcharts that result. If the answer comes out as Snowballing – ie together you can afford the minimum payments on all your debts, then this is almost certainly the best answer. At the end it will leave you both with great credit ratings and won’t affect your ability to get a mortgage in the future.
But if one of you can afford the payments on their debts, but the other one can’t, then you need to explore more options by doing three sets of Financial Summaries. One for the two of you as a couple treating the debts as joint, and then a pair, one for each of you with just your debts.
It may be better for one of you to opt for a Debt Management Plan or even insolvency (eg bankruptcy) and for the other to carry on paying their debts in full. This typically works best if the partner with the most debt has the lower income, or if you have roughly equal debts and incomes. Unfortunately it is more common to find that the higher earner has the more debt, especially if one of you is a full-time stay at home parent.
It may be possible for one of you to go bankrupt, even if you own a house together, so don’t automatically rule anything out at this point but explore all the Debt Options for each of you. It’s going to be complicated working through all your combined options but it’s worth doing to know that you have made the right choices.
They are my partner’s debts and I don’t see why I should pay them
Fair enough – and legally you don’t have to. Some points you might want to consider though:
- was the money spent partly on things for both of you? If so, have you been contributing your fair share to the household – and ‘fair’ may mean more than half if you earn a lot more than your partner.
- is this your ‘forever’ relationship? There is a difference between having a great time together, and planning your future lives, houses and children together. If you want to get on with the latter, then it’s going to happen sooner if your partner’s debts are cleared.
- there is a lot of difference between helping your partner sort out old debts and funding an ongoing over-spending habit.
You may want to find a middle way between ignoring your partner’s debts and paying them. Perhaps a joint campaign to economise would work, with half the savings going to clear your partner’s debts and the other half going into your ISA allowance for this year. That way you are being supportive and actually improving your own finances. Perhaps you could pay for all of this year’s holiday, or agree that you will put more money into the joint account each month – of course this is effectively paying some of your partner’s debts, but psychologically it may feel better for both of you than you paying his Barclaycard bill.
My partner wants me to take out a loan as I have a better credit rating
Ouch. You don’t have to agree with Flaubert to want to think long and hard about this one.
If your relationship is long-term and rock solid, and if this loan is to clear debts, and you are certain that the debts won’t be run up again, well perhaps. But too many couples split up in the end because of money problems and if you have taken on this debt, you are stuck with it.
My partner doesn’t realise I have problem debts
If your debts are bad enough to be causing you worry, then it’s very unlikely that you will be able to keep them secret from someone you live with. They will notice you being furtive about the post or getting odd telephone calls. If you suddenly don’t want to go down the pub most nights as usual and no longer seem keen on booking the Maldives holiday you had been planning, they may think you are pregnant or having an affair – finding out that you have debts you want to tackle may come as a relief! Obviously that is looking on the bright side. But if you are in a serious relationship then your partner needs to know, because it’s impossible to plan a joint future if one half is keeping quiet about a huge problem.
If you think they are going to be horrified, then the best approach may be to say that you have a big debt problem, you are very sorry for not telling them earlier, but you are really serious about tackling it and you have now got A Plan (with the help of this really great website!) and you would like their advice on it. Do the Financial Summary using just your income and halving joint expenditures on rent, utilities etc and show them what your options are.
If you are still at the dating stage, are you feeling the need to impress by waving your credit card around? It’s a cliché, but if that is the main thing someone wants from a relationship, you would probably be better off (and not just financially!) without them. You don’t need to turn into Scrooge overnight, but you do need to find things to do together that don’t cost a lot of money – eating in more and consuming less alcohol will be better for your waistlines as well as your finances.
My partner has debts and doesn’t seem to want to tackle them
Ah. Do you know why?
If they aren’t good with money it’s possible they are just scared, have loads of unsorted bills and don’t want you to think they are an idiot, so it’s easier to try to pretend there isn’t a problem. In that case they need sympathy, a non-judgemental attitude and someone to sit down and work through the scary letters with them.
If they have other problems then money may just not seem that urgent. Major stress at work or someone in their family that is very ill may mean that they have no energy or that they can’t at the moment think of cutting back on the petrol needed for visits to their parents. Depression may mean that they are barely up to getting out of bed let alone talking to their creditors.
Perhaps you are on a different timescale? A couple of years ago you wanted the same things, but now you want to settle down and buy a house or have a family (or both!) and they haven’t got to that bit of growing up yet? Do you think they are ever going to get there?
Up to a point you can just concentrate on improving your own finances and wait for your other half to see the light. But if your savings on utility bills vanish with her buying yet more clothes she doesn’t need (or him getting the newest boy’s toys) then you may feel as though you are trying to fill the bath up and your other half keeps taking the plug out. Only you know if you can live with this in the long term.
We aren’t together any more and have to sort out debts
When you separate, it’s good to also try to disentangle your finances and resolve debt problems – I have covered this in this article: Splitting up – how to separate your finances.