One of the most common debt concerns for customers is how their debt could affect their partner or spouse.
Marriage and debt can be a tricky topic and there are many misnomers and myths about which debts you might be jointly liable for with your spouse.
Here’s everything you need to know about whether you are responsible for your spouse or partner’s debt.
Your credit file
The common belief is that when you get married, your credit file will be linked to your spouse in a joint credit file.
However, this is not the case; your files are only linked in the case of joint credit agreements. That means marriage alone won’t affect your credit file.
Another common myth is that your credit file will be affected if you change your surname after marriage. Again, in this case, your credit history will remain the same and the only difference to your file will be your new name which is added as an alias.
Joint credit applications
What will have an effect on your credit file are joint credit applications.
- Joint bank account
- Joint credit card
- Joint loan
- Adding your partner to an account
In the case of joint applications, if you or your spouse / partner has poor credit, it can affect the others’ file.
Any joint debts you have will be treated by the lender as “jointly and severally liable”.
Unfortunately, that means that if one of you can’t pay for any reason – including accident, sickness, abandonment or even death – the other partner will be responsible for the entire debt.
What to do if you split up
Many people aren’t aware that when couples break up either one can be 100% liable for money owed for any joint debts.
It means that if one person takes out a large sum of money without their ex-partner’s knowledge, the bank or building society may ask the other person to make all the payments before allowing the account to be closed, as both people are liable for the debt.
Worryingly, financial experts have found that in contentious relationship breakdowns, it is usually women who disproportionately suffer more when dealing with joint finances. This is especially concerning if there is a case of an abusive partner.
Anyone going through a break-up is advised to tell their bank and creditors as soon as possible. As soon as they’re made aware, the bank should move to freeze the account, so only pre-authorised payments will be released, and creditors won’t get involved.
Alternatively, the bank may be able to reach an agreement with you so they will accept lower payments if you can’t repay in full.
If you don’t think they are dealing with you fairly, you can complain to the Financial Ombudsman Service.
Talk about it
How much do you know about your partner’s finances? A recent study found that one in five adults in the UK keeps their debt secret from their partner.
The study also found that a third of adults in the UK keep a secret stash of money from their partner, with a lack of trust given as the primary reason for being secretive over money.
Many more won’t tell their partners about their debts because they are worried about how they will react.
Financial privacy is one thing but too much secrecy can cause issues down the line – especially if you’re unaware of your partner or spouse’s credit history and make any joint applications.
You should be open about the amount of cash you have stashed away too as this wealth could affect your family’s entitlement to certain state benefits, and it could even be split between you to mitigate certain tax liabilities.
How well protected is your spouse?
It’s not something a lot of us want to think about but do you know how much life insurance your partner has?
Life and critical illness cover can provide peace of mind and protect your family if the worst were to happen and limit the financial impact on you.
Similarly, is your partner’s income covered if they are made redundant or suffer long-term illness or injury? Income protection or payment protection insurances can provide meaningful cover in the event they have to take an extended period off work.
Your partner’s pension is also an important thing to be aware of. Do you know how much your spouse will get in retirement?
This is even more important if you haven’t been able to pay as much towards your own pension as you would like. Consider speaking to an independent financial adviser about how you and your spouse can plan for retirement.