Joint debts between partners (personal and business) create some of the biggest tension in relationships. Many of our clients come to us for help with this issue, especially where there has been a breakdown in the partnership.
At the outset if a debt is joint, each person will be treated as if they owe the total debt. So if one person does not, or cannot, manage repayments, the creditor can chase the other person for the full amount.
Normally an individual’s credit behaviour is their own. However, if your partner does not pay a joint debt, and even though you may not be aware this is happening, your credit rating will be affected if the loan ends in default.
In some cases, a Debt Agreement is worth considering, although it will only relate to one person’s obligations and has no impact on the other person.
Generally speaking, Debt Agreements are more cost effective in handling unsecured Debts than an informal arrangement, but this changes where a large proportion of the debt is Joint Debt.
Paul and Sam were former partners in a small business, and had a joint debt of $50,000 as well as a small amount of individual debt. A dispute arose about how much each should be repaying to service the joint debt.
Paul entered into a Debt Agreement on his own behalf which reflected the full amount of the joint debt but had no impact on Sam’s obligations on the same debt.
Sam was in need of good debt management advice and came to Fast Debt Help. By continuing to make the minimum payments on the debt, Sam’s credit rating was preserved. This gave the former partners time to resolve the dispute and to agree on a way forward.
Had they not come to a resolution, Sam also could have approached the creditor directly, seeking a repayment plan within budget and over a manageable time frame.
In difficult times like the end of a financial partnership, it’s important to get expert, independent advice. Fast Debt Help is ready to make sense out of your situation.