Joint Debts and a Trust Deed
19th October 2011
For those considering a trust deed; as well as their own debts, some people have debts which are in joint names with another person. Often these will be a bank loan or a bank current account. Joint debts are usually with a partner or ex-partner. In this article we will discuss how joint debts are dealt with in a trust deed.
Taking a debt in joint names means that both parties will have “joint and several liability” for the repayment of that debt. If one person, for whatever reason, becomes unable to make the monthly repayments or enters into a trust deed, the other person will automatically be responsible for paying the full balance.
Some debts which you think have joint liability may in fact not do so. There is no such thing as a joint credit card for example, only a second card holder, so any liability incurred will be with the original account holder no matter who spent the money.
If both parties to the joint debt enter into a trust deed, the joint account will appear in each trust deed for the entire balance. For example, if you have a £7,000 joint loan, the £7,000 will appear in the trust deed of both yours and your partner amongst the other creditors.
If you have joint debts with your current partner and you are considering entering into a trust deed, but your partner is not keen on a trust deed, you may want to consider how and if they can afford to repay the debt. The lender may pursue your partner for the entire balance if you get into a trust deed (not just half of it as some people erroneously assume).
The best way to deal with this situation is for your partner to make the full monthly payments out of their monthly income. However, often this will not be possible or affordable. This may mean that they should also seek trust deed or debt advice themselves. It may be possible and appropriate for them to do a trust deed or Debt Arrangement Scheme to deal with their debts as well.
Sometimes one partner can decide to enter into a trust deed, or suddenly stop paying a joint debt, following a divorce or separation. Often this is done without telling their ex-partner which can obviously come as a nasty shock. In this situation the lender will generally look for the other party to the debt to repay the debt in full rather than the party in the trust deed.
If you have recently discovered that your ex-partner is signing a trust deed (or has already signed a trust deed) and you have joint debts with them, you may be angry at first. Try not to let this prevent you from taking a rational view of the situation and taking debt or trust deed advice if it’s necessary. If you cannot afford the full repayments for the debts on your own you’ll need the help of a professionally qualified debt or trust deed adviser so that you can plan your next steps given this new reality.
Whether in connection with a trust deed or not, joint debts can lead to tricky situations when debt becomes a problem for one of the parties. Good trust deed or debt advice can make the difference between a hasty poor decision or a rational response to dealing with the facts as they have become.
To find out more about how to deal with a joint debt when you require a trust deed, take a look at the rest of our website. www.Trust-Deed.co.uk is full of helpful trust deed advice to help you make an informed decision about your trust deed and finances. Our team of professionally qualified trust deed advisers are ready to help, both online and on 0800 043 7201 now
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