Debt problems come in all shapes and sizes. So do personal relationships. And debt management plans (DMPs) are very flexible arrangements.
The combination of all of these means there isn’t a simple answer to the question about how your DMP will affect your partner, but here I look at the most common questions people have.
Will my partner’s income be taken into account?
In debt management, you show your creditors an Income & Expenditure list – the “difference” between these two figures is basically what gets paid to your creditors every month. There are two options for how the Income & Expenditure is drawn up for a couple.
Use a joint budget
One approach is to use your common household budget with both your incomes and all expenditures being listed. If you have lived together a long while and have children and assets together this is often the most sensible approach.
Here your partner’s income is contributing to your DMP, but it will let you clear the debts faster. They may have been “family” debts anyway, even though they are in your name.
If you have a joint mortgage and want to remortgage, or want to get a first mortgage together, then you both need to sort out “your” debt problem as fast as possible.
Split the expenditure
The alternative is for the joint expenditures (rent, council tax, utilities, groceries etc) to be divided between the two of you.
50/50 is the simple split. But if one of you earns a lot more, dividing them according to your incomes can be more sensible. Then your I&E shows your portion of the joint expenditure and your personal expenses – your travel costs, clothes etc.
With this approach, your partner’s income isn’t going into your DMP. It’s common to feel this is more appropriate if your debts came from before you met.
If you are discussing a DMP with a debt management firm and they want your partner’s income taken into account and you don’t, then talk to a different firm (choose one that doesn’t charge any fees such as StepChange!).
Or you could set up your own debt management – read Is it a lot of work to run my own DMP?
Can my partner carry on paying his own debts?
If you are going for the “dividing joint expenditures” option, then your partner should be left with some money after paying their share of the joint expenses. If this money is enough for them to pay their own expenses and make their own debt repayments then this is fine – and it means they will be able to keep their good credit rating.
But if your partner has a lot of debt and can’t afford to pay their debts and their share of the joint expenses, then they too have a debt problem. Here it’s usually a good idea to see what your joint options are as a couple for your debts.
This could mean you both having a DMP, but if the debts wouldn’t be repaid in a reasonable length of time, you need to consider other options such as insolvency or selling the house.
Sometimes it can be useful for the two of you to have different types of debt solutions because one person has a much smaller problem or it may be possible to protect one person’s credit rating. See When a couple needs two different debt options, which looks at this. It may sound complicated, but once it is underway, you may get a much better result!
What about my partner’s credit rating?
Your partner’s credit score will be damaged by your DMP if you have a financial link:
- a joint bank account;
- a joint loan or mortgage (NB having a second card on your partner’s credit card account isn’t a financial link); or
- your partner has guaranteed a loan you have.
It’s worth looking at your credit report with each of the three Credit Reference Agencies in detail. If you are financially linked, your partner’s name will appear on your report in the Association section. If it doesn’t appear, then you aren’t linked.
Will our house be affected?
When you are in a DMP, it is still possible for a creditor to take you to court for a CCJ and then get a “charge” over your house.
This is rare. See Is my house at risk from a Charging Order? which has statistics.
It is unusual for a creditor to go to court for a Charging Order for a consumer debt such as a credit card, catalogue or loan – the only common exception is guarantor loans where lenders can be very fast to get CCJs and Charging orders over the guarantor’s house.
This is slightly more likely to occur if you owe a lot to a creditor and you are making low payments to your DMP for a long while. If your DMP seems likely to be very long-term and you have equity, then it would be a good idea to look at other possible debt solutions instead.
If it does happen, the charge is only on your share of the equity. Your partner’s share cannot be affected.
I’m moving in with my partner, what happens to my DMP?
Most of the time when you move in with someone your expenses will decrease. You should tell your creditors and show them a new Income & Expenditure sheet (see above for the two ways of drawing this up for a couple) and start paying them more…
But I wouldn’t rush into doing this – give it a few months so you know this is the right move for you. Then you will also have a good feel for the costs of living together and you are both happy with how much you are each paying towards the bills. At that point you can look at how your DMP should be changed.
Sometimes your expenses will increase – if you had been living with your parents for free, or if your new partner is going to be losing a lot of benefits when you move in.
Here you need to redo a new Income & Expenditure sheet straight away and reduce your DMP payments – your creditors may not like it but you don’t have an option.
If this means your DMP is no longer sensible, you may have to look at options such as bankruptcy or a Debt Relief Order.
Will my new partner’s house be safe if I move in?
Yes. If the house is not in your name, it cannot be at risk from your DMP.
Will it make a difference if we get married?
This won’t change your DMP at all.
Getting married doesn’t affect the legal liability for your debts, it won’t link your credit ratings and it won’t change the amount being paid to your DMP.
Do I have to tell my partner?
Legally, No you don’t.
But practically, unless you expect your DMP to be a very short term temporary arrangement, there are very good reasons why you should tell your partner.
- their credit rating may be affected (see above) or you may be turned down for joint credit such as car finance.
- if you have a joint mortgage, your partner is very likely to find out when your current mortgage fix ends and you look for a new one.
- in the DMP you may need to make a few lifestyle changes. Say no to going to a friend’s wedding abroad, start taking sandwiches into work etc. Managing a budget when you want to get rid of debt takes commitment. It’s hard to do this if you are trying to pretend that nothing unusual is happening to your partner.
- your partner may find out by accident in a couple of years time. Taking a phone call from a creditor, or seeing a letter. or they may inherit some money and want to buy a house, but your DMP may prevent that. At that point it isn’t just your debts your partner may be upset about, it’s the fact you have concealed them.
So although telling your partner now may be awkward or even difficult, the alternatives are usually worse.
And whatever your situation…
Talk it through with your partner. Emotional support can be just as important as financial help.
There are more important things than money and debt – don’t let these ruin your relationship.