What is joint and several liability with personal debts?

July 29, 2019

Joint and several liability is a term used in relation to personal debt when the borrowing is in joint names. It reflects the fact that the two parties to the loan are liable to repay it if a default occurs, both jointly and individually.

A mortgage is one type of loan commonly taken out in joint names, but personal loans and overdrafts are other forms of borrowing where joint and several liability may come in to play.

So how does being held jointly and severally liable for personal debt affect you in practice?

How does joint and several liability work?

Here are a few scenarios where joint and several liability applies:

  • When a mortgage, personal loan, or overdraft is taken out in joint names: in the case of an overdraft, the bank account would be held in joint names – the lender may approach both parties together or individually if it’s not repaid when requested.
  • When only one partner is actually repaying the loan in practice: maybe the other person is earning less money or is responsible for paying other household bills – regardless of this, if the contractual terms of the loan aren’t met the lender can turn to either party for full repayment of the outstanding amount.
  • If a mortgage is held in joint names but one partner moves out of the property: they remain liable for the full amount of the loan if the remaining partner fails to pay, even though they no longer live there.
  • If you’re an additional cardholder on someone else’s credit card or store card account, it’s worth knowing that you can’t be held liable as you’re not named as an account holder.
  • On the other hand, if it’s your credit card account and a partner is an additional cardholder, you’re responsible for the full amount of any debt they run up on the card.
  • Joint and several liability can also apply to other debts including council tax and arrears of water charges where two people have occupied the property, and also outstanding rent payments on joint tenancies.

Why is joint and several liability used by lenders?

Lenders reduce their risk when they can hold two people liable for repayment, either individually or together. The key issue is that you’re both responsible for the full amount of any debt outstanding, rather than half of the amount each.

If you’re not sure whether you’re jointly and severally liable for a loan, it’s advisable to look at the original documentation to see if you’ve signed the agreement. If you have, unfortunately it means the lender could pursue you for repayment if the joint holder falls behind or deliberately doesn’t pay – a relatively common scenario when couples separate or divorce.

For more information on joint and several liability with personal debts, call our team of experts at UK Debt. We specialise in helping people to escape debt, and will provide reliable independent advice. Operating from a broad network of offices around the country we’re able to arrange same-day appointments, and these are free of charge.

Paul Barber

Head Adviser at our Manchester Office

Tel: 0800 001 4247
Email: enquiries@ukdebt.org.uk

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