Whether or not you can continue using a joint bank account when you start your Debt Management Plan (DMP) will largely depend on whether there is currently an outstanding overdraft and whether you personally owe anything else to the same bank.

If the answer to these questions is no then there should be no problem with both you and the other joint account holder continuing to use the account.

However, if there is an overdraft on the account and or you owe other debts to the same bank then what you do with the account requires more thought.

Can you keep the account if you have no other debt with the bank?

Generally speaking if you start a DMP all of the unsecured debts that you owe should be included. This includes the full outstanding overdraft on any joint bank account.

However if you have no other debts to the same bank there is an argument for leaving the overdraft out of your Plan and keeping the bank account running. The reason for this is that if you include the overdraft the other joint account holder is still liable for 100% of the outstanding debt.

As such keeping the account open gives you both the opportunity to repay the overdraft in a sensible way and saves going through the hassle of you both opening a new account and changing all your payment direct debits.

BMD Tip: If you do decide to keep your account open in these circumstances it is import that you then keep the overdraft facility under control and make plans to pay it off as soon as possible.

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What if you do owe other debts to the bank?

If you have other debts with the same bank such as credit cards or a personal loan you will almost certainly be including these in your DMP. In these circumstances you should both stop using any joint bank account and open a new one.

This is the case even if there is no outstanding overdraft on your account because of what is known as the banking set off rule. This allows your bank to offset unpaid debts in one account such as a credit card from a positive balance in another account such as a savings or current account.

The bank can do this without your permission and without warning and can do so even with funds paid into the account from the other joint account holder who is not party to the other debts.

The only way to be certain of preventing off setting from happening is to stop using your bank account entirely and move to a different bank where you do not owe any money. The other joint account holder will have to do the same thing. You may want to open another joint account elsewhere or have two separate accounts from now on. This will ensure that both of your funds are protected.

If there is an overdraft on the bank account you may not be able to physically close it. However, the other third party should try to have their name removed from the account. This is so they do not become liable for any overdraft that may develop in the future if the bank tries to take loan or credit card payments while there is no money in the account.

Who is liable for any joint overdraft debt if you start a DMP?

If you decide to open a new bank account and there is an outstanding overdraft on your joint account remember that even if you include this balance in your debt management plan the other joint account holder will also remain liable for this joint debt.

As such if you are doing a household income and expenditure you should make sure there is a budget available for the other account holder to make monthly payments into the old account so that the overdraft is gradually paid off.

If you do not do this then the bank may well start collection activities against the other account holder.