A reader asked:
“I had a joint loan, now sold off to a debt collector. I have been chased by numerous debt agencies for a few years now. The debt collectors have been chasing me solely and causing masses of stress when they should have been splitting the debt and chasing my ex partner as well. I think I have been very unfairly treated!”
This is a very common problem. Lots of people think that if they have a debt in joint names, they only owe half the money each, but often this is wrong. You need to know the situation for the different types of debt – and what your options are after you split up if your ex isn’t paying “their share”.
First an important legal term:
Joint and several liability
If there is “joint and several liability” for a debt, all the people included are each responsible for the whole amount of the debt. This applies even if you have an agreement with the other person that you will each pay half.
It means that the creditor can chase either of you – or both of you – for the debt if it isn’t paid on time. If the debt is for £1,000 and you “pay your £500” then it is very likely that the debt collector will carry on chasing you and your ex for the remaining £500.
Types of debt and bills
The following is a summary of different sorts of debts and bills, looking at who has to pay how much when a couple splits up or a house share arrangement ends:
- Unsecured loans You will both be jointly and severally liable for the whole debt. It was one of these loans in the query above, so unfortunately the answer was that even though it feels very unfair if debt collector only pursues one person, legally they are allowed to do this.
- Mortgages and other secured loans These too will be “joint and several liability”. They can often be the hardest type of problem to deal with if you split up, because even if the two of you are agreed that X should have the house and the mortgage, the lender may refuse to take Y’s name off the mortgage.
- Credit cards These are only in one person’s name – your ex may have had a card on your account, but legally you are responsible for repaying everything on it.
- Overdraft You are both jointly and severally liable for an overdraft on a joint bank account
- Council tax bills If you are married, or living together as though married, then you are both jointly and severally liable, even if the bill was only issued in the name of one of you. If this was a house share, if one of you owns the house or is the named tenant, they are liable. If you were all named tenants, then you are jointly and severally liable so you can all be chased for the full amount.
- Electricity & gas bills The person named on the bill is responsible for paying it. If more than one person is named on the bill, they are jointly and severally liable. If a named person leaves the property they are responsible for the usage up to that point, but not for future usage.
- Water bills Adults living in a property are jointly responsible for paying water and sewage charges, even if only one person’s name is on the bill. If the named person leaves the property, the water company is likely to chase the person who still lives there for previous debts as well as future bills.
- Tax credits overpayments Legally a tax credit claim for a couple is a joint claim and you are both liable for any overpayment. However HMRC will usually accept that a tax credits overpayment can be treated as though each of you owes half of the amount.
The above covers the most common cases – there are lots of complications and it doesn’t cover unrelated issues such whether the landlord or tenants should be paying bills. If you need advice on your situation, phone National Debtline or go to your local Citizens Advice.
Try to minimise joint debt problems
Your top priority has to be stopping any problems getting worse by ending joint financial relationships as soon as possible:
- get a card on your credit account that is used by your ex cancelled;
- change any pin numbers and passwords, including online things such as a Paypal account – of course this shouldn’t be needed, but better safe than sorry!
- inform the local authority council tax who has moved out. (If only one adult is left they should get a 25% single person discount);
- inform utility companies and, if possible, take meter readings;
- inform HMRC, DWP and local authority where there are any benefit claims (this applies even if a claim isn’t joint as one of you leaving is usually a “change in circumstances”.
If the split is amicable:
- it is still best to try to separate all your account and credit records, see How to separate your finances when you split up for details;
- talk about who is morally responsible for each debt as well as who is legally responsible;
- top priority may be a rental deposit for the person moving out, but after that clearing joint debts should probably be done as fast as possible;
- consider family mediation if things are complicated.
Even with amicable splits there are often big money problems as the costs of living separately are normally much more than living together, so debts that were previously manageable may no longer be.
“It’s not fair – what can I do?”
If the legal liability feels very unfair on you, there may be little that you can do about it:
- you took out a loan for your partner but they now can’t afford to make the repayments… although in theory you may be able to take legal action against them, if they have no money there is absolutely no point;
- in a flatshare that has ended, you all gave your share of the council tax to one person, but the council is saying the bills were never paid and no one is in touch with the person any longer;
- you paid for all the food and clothes for the children out of your part-time earnings, now HMRC says there is a big tax credits overpayment and you have to repay half but it all went to your ex.
If there is joint liability for the debt and the other person(s) don’t seem to be paying their share and are not being chased by the creditor, then you could pass on contact details for them to the creditor if you know them. If this doesn’t work after a while put in a formal written complaint to the creditor that the other joint debtors are being ignored. This is more likely to work if you can also show that you cannot afford to repay the debt within a reasonable timescale.
Another option that can occasionally work is offering half “in full and final settlement” if the creditor will agree in writing not to pursue you for the remainder of the debt and not to sell the debt to a debt collector as a joint debt. Again this is more likely to be accepted if you can’t afford to pay anything and the money is coming from someone else (a relative perhaps?) who is helping you.