What is joint debt?

Joint debt refers to any debt co-signed by two or more individuals, typically partners or business associates. Taking on a joint debt means the money owed isn’t only your responsibility. If you and another person are both named on a credit agreement, then you’re both legally obligated to make repayments.

The most common examples of joint debts include:

• Mortgages
• Credit card debt
• Bank loans

Handle joint debt carefully

The most effective way to protect yourself against the risks associated with joint debt is by taking preventative actions. Ideally, try to work on building your own credit score and savings independently. This should then reduce your need for a co-signer if you need to apply for loans in the future.

When considering taking out a loan with someone else, it’s important to assess whether you can both realistically manage the repayments. This means if one party cannot or does not make payments, the other party will be responsible for the entire debt.

Debt solutions

If you’re struggling to keep up with your joint debt payments, it’s important to communicate with the other party and the creditor immediately. There are several debt solution options available that might suit your situation, including Individual Voluntary Arrangements (IVAs) and Debt Management Plans (DMPs).

Individual Voluntary Arrangement

Joint debts can be included in an interlocking IVA, provided all involved parties agree to it. If only one party enters an IVA, the other person named on the joint debt will still be responsible for making payments and will be liable to pay the remaining money back.

An IVA for joint debt allows you to make manageable payments towards your total outstanding debts over a specific period of time­—typically five or six years. After this period, any remaining debt may be forgiven. While IVAs offer significant relief from financial pressures, they do impact your credit score. An IVA will appear on your credit report and could affect your ability to secure new credit during the term of the IVA and for a period afterward.

To learn more about IVAs, see our Pros and Cons of an IVA article.

Debt Management Plan

A Debt Management Plan consolidates multiple debt payments into a single, manageable monthly payment that is handled by a debt management agency.

The company then allocates the payments among your creditors. For those managing joint debts, it might be worth considering a joint DMP, as one monthly manageable payment can prevent you from having to juggle several accounts and payment schedules.

However, like IVAs, DMPs also affect your credit score and may affect future credit opportunities.

Managing joint debt after divorce

Joint debt after a divorce or separation can be complicated, as both parties remain responsible for the debt regardless of any personal agreements made between them. Creditors can pursue either party for payment if the account defaults. It’s important to address how joint debts will be handled as part of any separation agreement to prevent future financial disputes and to prevent the debt from negatively impacting both parties’ credit scores.

For more help, see Who Is Responsible for Debt After a Separation.

Facing challenges with joint debt?

Dealing with joint debt can be particularly stressful, especially if the relationship between debtors becomes strained. For free debt advice, you can contact MoneyHelper or reach out to one of our expert debt advisors for personalised guidance to help you regain control over your finances.

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