Many people worry that getting married, being in a long-term relationship or the death of a spouse means they will be liable for their partner's debt. This is not the case, but there can be certain situations where you agree to share or take on all the responsibility.
If creditors are demanding that you pay someone else's debt for them, it's important to check what your obligations are.
When am I responsible?
The most common reasons you will be responsible for someone's credit card debt, loan or other type of debt are if:
- You signed a guarantor agreement – if you are the guarantor of someone's credit card or loan, you have agreed that the credit card company or lender will transfer their remaining debt to you if they default on their repayments.
- You have a joint account – if you and your partner or another party open a joint bank or credit account, you will normally both share responsibility for the full debt, regardless of who contributed to it. Unless you sign the credit agreement alone, in which case you have full responsibility even if it's a joint account.
- You opened an account for someone else in your name – it's never advised to sign up for a credit card or a loan using your own details if the account will be used by someone else, as they will have no legal obligation to keep up with repayments and you will be fully responsible.
How can I check?
If you're not sure whether you've signed as a guarantor or joint account holder, you can check with the lender whether the account bears your signature and anyone else's. You may also be accountable if you've made a written or verbal agreement to pay someone's debt for them.
You will be held liable for someone's debt as a guarantor or joint account holder if they default on their debt by missing payments or passing away. If your signature is not present and no other agreement was made, you won't be liable for any debt, regardless of the person's relationship to you or whether you used the account as an additional card holder.
A deceased person's assets may be repossessed to cover their remaining debt after death. If there is still debt remaining, this expires with the debtor and no further attempts should be made to recover it. You can't be held accountable for a partner's debt that was built up prior to your marriage.
What if I want to help?
If you decide that you want to help someone to pay off their debt, you can transfer money to them for that purpose or arrange for their debt to be transferred to you. This involves signing a guarantor agreement with the bank, credit card company or other lender. If they have already defaulted on their debt and it has entered collection, you can arrange to pay it privately.
You should think carefully and talk to a financial adviser before taking on the burden of paying someone else's debt. If you want to discuss your options to reduce debt with no obligation to continue, call Debt Fix's experts today on 1300 332 834.