Very often money is borrowed in joint names and two individuals are therefore named on the credit agreement. However only one of the two actually creates the joint debt as only they actually spend the money. This situation is common with credit cards, bank overdrafts and even personal loans.

Normally repaying joint debt does not cause an issue because the funds are made available from a joint bank account or the person who has spent to the money is happy to repay it. However problems can occur if one person refuses or is unable to repay the debt and the other does not believe that they should have to repay money that they did not spend.

Joint debt means joint responsibility

Under the law if you are jointly named on any loan, overdraft or credit card account, then you are responsible for repaying the joint debt. This responsibility still stands whether or not you have personally spent any of the money that has been borrowed.

If for some reason the other party named on the account cannot pay or refuses to pay you will be required to repay 100% of the remaining balance.

BMD Tip: The lender will try and recover the money owed from both people named on the account. But they will do so at the last known correspondence address for that person. If the individual has moved away and no new means of contacting them is available the bank will simply put all of their effort into chasing you. This is quite simply because they know where you are

What can you do if you owe a joint debt you can not pay?

Being left responsible for repaying a joint debt which you did not spend is never pleasant. Unfortunately you will not be able to use the argument that you did not spend the money. As you signed the loan agreement you are liable to repay the money.

If you cannot afford to repay the debt you will need to do something before the creditors start enforcement action against you. There are a number of debt management solutions that you should consider.

BMD Tip: If you use a debt management solution the bank will then try and contact the other joint account holder to see if they can recover the remainder of the money from them. It will mean they put more effort into trying to find the other party as this is the last possibility for the bank to be paid in full.

Think carefully before agreeing to a joint debt

Where two people borrow money in joint names they are both personally liable for the repayment of any debt incurred. This joint responsibility remains even if only one party spends the money and the other receives no benefit at all.

If they do not repay the debt, the person who has not spent the money will always be pursued by the bank for the payments.

For this reason, if you are considering applying for any type of credit in joint names with someone else, you must make sure you both understand that in the event that one party cannot or will not pay the debt, the other will remain responsible for repaying it all and may face court action if they refuse.