Debt can be a complicated and confusing subject at times. Read on for simple answers to some of the most frequently asked questions about debt.
Am I liable for my partner's debts?
If you have a joint credit agreement with your partner then you're both responsible for paying off the whole debt. This is known as 'joint and several liability'. For a credit agreement to be joint and several, you and your partner must both have signed a form required by the Consumer Credit Act. If you haven't signed an agreement like this, you aren't liable for your partner's debts.
Joint and several liability can also apply if you are in arrears on rent payments on a joint tenancy, if you are in arrears on a joint mortgage, as well as on council tax payments for couples and water/sewerage charges on properties which you occupy jointly.
If you are in any doubt, talk to the individual creditor to get a clear picture about whether or not you are liable for the debt.
Could I lose my home because of my debts?
Having large debts does not necessarily mean losing your home. There are many different ways of dealing with debt, and which one is right for you will depend on a number of different factors, but not all of them mean you will have to lose your home.
If you file for bankruptcy, losing your home is a strong possibility, but other debt solutions like an IVA or a Debt Management Plan may mean you can keep your home and pay off your debt. It is important that you speak to a qualified debt advisor to find out what your options are - charities like CCCS, Credit Action and National Debtline can help. You can also use the uSwitch debt help tool to get an idea of the different debt solutions open to you.
Which debts should I pay off first?
It may be tempting to focus on your biggest debts when you're trying to decide what debts to repay first, but it's important to pay off your debts according to which ones will have the most serious consequences if you don't pay.
High priority debts include:
- Rent/mortgage payments - if you don't pay your rent your landlord can evict you and if you don't keep up with your mortgage payments the lender can take legal action against you or repossess your house.
- Utility bills - if you don't pay your gas and electricity bills, your supply can be cut off. Your water supply cannot be cut off, but it is still a priority debt as non-payment could result in a County Court Judgment.
- Council tax, business rates, court fines, child maintenance payments - not paying these debts can have very serious consequences. A court could use a bailiff to enter your home and take away your property.
- Tax - Not paying tax can lead to you being made bankrupt or having to go to prison.
What action can my creditors take against me if I can't pay?
The type of action your creditors can take is dependent on the type of debt you have accumulated and how long you have delayed paying back your debt.
- Mortgage - you could lose your home.
- Rent - you could be evicted.
- Secured loan - you could lose your home or whatever your loan was secured against.
- Council tax - the money could be deducted from your pay, bailiffs could repossess your property, or in severe cases you could even be imprisoned.
- Magistrate's fine - bailiffs could repossess your property, or in severe cases you could be imprisoned.
- Inland Revenue or VAT - bailiffs could repossess your property, you could be declared bankrupt or in severe cases you could even be imprisoned.
- Utility bills - your gas water and electricity could be cut off or you could have a pre-payment meter installed. Your water supply cannot be cut off.
- Child support/maintenance - the money could be deducted from your pay, or in severe cases you could be imprisoned.
- County Court Judgement - the money could be deducted from your pay, bailiffs could repossess your property, or a charging order could be put in place, which secures the debt against your home.
- Credit cards, store cards, unsecured loans, overdrafts, credit sales etc - you could be given a County Court Judgement, which means the County Court will make a legal judgement ordering you to pay. CCJs are recorded on your credit file for 6 years and can harm your chances of getting credit.