If your personal finances are largely or completely separate from those of your spouse, you are only legally liable for debts in your name. In other words, you are not responsible for your spouse’s debts if your name does not appear on the original credit agreement.
There are one or two exceptions, including council tax debt in England and Wales, but generally unless a debt is in your name, alone or jointly with another person or group of people, the debt is not yours in the eyes of the law.
In this article we will discuss various elements to this discussion, however this is only an outline guide and is not financial advice. If you’d like to find a financial adviser, please look at official government websites which list regulated individuals who may be able to assist you.
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Joint Liability
If you open a joint bank account or enter into any joint credit agreement, such as a mortgage or personal loan, with your spouse, you are equally and jointly liable for the whole outstanding balance of the debt. In the same way that the money in a joint bank account is jointly owned, regardless of who put it into the account, responsibility for a debt is shared among all those who signed the credit agreement. If you fail to repay the debt, a creditor can legally pursue you or your spouse, or both, until the debt is cleared in full. This mechanism allows a creditor to attempt to recover the debt if you or your spouse refuse to pay or cannot be contacted. Similarly, if you act as a guarantor for your spouse you are liable for the debt if he or she fails to repay it.
Debt Management
It may be possible to discharge your liability for a joint debt through bankruptcy, an IVA or a debt management plan, but this may still affect your spouse. If a lender accepts a change to an original credit agreement, they may issue a default notice, which appears on your credit report. Lenders are required, by law, to report all payment history on joint accounts on both credit reports, so your spouse may have difficulty in obtaining credit in the future even if he or she isn’t experiencing financial difficulty.
Legally speaking, you are not obliged to tell your spouse if you agree to a debt management plan, but unless your finances are completely separate it may become difficult not to.
If you or your spouse goes bankrupt, the official receiver will require a breakdown of who contributes what to household bills, even if you have no joint debts or assets.
Ultimately, as any good finance book will tell you, it’s better to be open and honest when communicating with your partner about your finances. Shoring up secrets will only risk resentment, confusion at a later date.
Notice of Disassociation
Note that your credit report connects you to your spouse and any other members of your household who are registered to vote, even if there is no financial connection, such as a joint credit agreement, between you. In this case, you can provide the credit reference agencies with what is known as a “notice of disassociation”, which explains that the only connection between you and your spouse, or anyone else in your household, is a shared address. You’ll need to provide your full name, the full name of the person from whom you wish to be disassociated, your dates of birth, your relationship to that person and any addresses you’ve shared.
