Be Aware Of Your Partner's Debt Levels
Borrowers planning to take on a mortgage with a partner or friend should make sure they know whether their co-signatory has big debts, advisers warn.
If the friend's debts become unsustainable and the courts become involved, the whole house could be sold off to repay them.
According to government statistics, personal debt in Britain stands at 1.13 trillion pounds, with the average household non-mortgage debt 7,650 pounds.
Alarmingly, two-thirds of EU credit card debt is British and perhaps more worrying is that 40 percent of women and 34 percent of men keep their debts secret from their spouse.
This high level of secrecy is one reason the Consumer Credit Counselling Service (CCCS) is warning people to read the small print of all credit and loan agreements they sign.
A CCCS spokesman said that if credit card debts were not seriously tackled, couples could potentially lose all their savings or even the house they were living in.
"If a partner runs up debt on their own credit card then that is solely their debt, in their name," he said.
"However, the situation changes if the couple share a mortgage or a current account. In that case, their credit records would be linked and it is likely that a credit card debt run up by one partner would appear on the credit record of the other."
CCJs
But the bad news does not just stop at poor credit ratings -- which could affect future loan or mortgage applications.
If a debt is not tackled, the credit or loan company could apply for a County Court Judgement (CCJ) which could see the forced sale of a property.
As to what happens then to the innocent party -- the spouse or partner who did not run up the debt -- the waters are not entirely clear.
There are two types of house ownership: Joint, where each partner owns the entire house; and tenants-in-common, where each owns 50 percent, or some other percentage.
If they are tenants in common, things are a lot clearer.
When the house is sold, the debt will be repaid from the proceeds of the 50 percent that belongs to the indebted partner.
In the case of joint ownership, the spouse who does not run up the debt loses out as the debt will be discharged when the house is sold and the settlement amount will come out of the equity, despite it being one spouse's debt only.
Joint credit cards can cause problems too.
With a joint credit card, the debt is inevitably shared but in many cases one party is unaware of how much the other is spending and does not see the monthly statements.
The CCCS often sees cases where people have found that their partner has run up secret debts on joint credit cards.
"In some instances, the partner has left the relationship, leaving the one who did not run up the debt to pay for it," said the spokesman.
www.myvesta.org.uk
LONDON (Reuters)
If the friend's debts become unsustainable and the courts become involved, the whole house could be sold off to repay them.
According to government statistics, personal debt in Britain stands at 1.13 trillion pounds, with the average household non-mortgage debt 7,650 pounds.
Alarmingly, two-thirds of EU credit card debt is British and perhaps more worrying is that 40 percent of women and 34 percent of men keep their debts secret from their spouse.
This high level of secrecy is one reason the Consumer Credit Counselling Service (CCCS) is warning people to read the small print of all credit and loan agreements they sign.
A CCCS spokesman said that if credit card debts were not seriously tackled, couples could potentially lose all their savings or even the house they were living in.
"If a partner runs up debt on their own credit card then that is solely their debt, in their name," he said.
"However, the situation changes if the couple share a mortgage or a current account. In that case, their credit records would be linked and it is likely that a credit card debt run up by one partner would appear on the credit record of the other."
CCJs
But the bad news does not just stop at poor credit ratings -- which could affect future loan or mortgage applications.
If a debt is not tackled, the credit or loan company could apply for a County Court Judgement (CCJ) which could see the forced sale of a property.
As to what happens then to the innocent party -- the spouse or partner who did not run up the debt -- the waters are not entirely clear.
There are two types of house ownership: Joint, where each partner owns the entire house; and tenants-in-common, where each owns 50 percent, or some other percentage.
If they are tenants in common, things are a lot clearer.
When the house is sold, the debt will be repaid from the proceeds of the 50 percent that belongs to the indebted partner.
In the case of joint ownership, the spouse who does not run up the debt loses out as the debt will be discharged when the house is sold and the settlement amount will come out of the equity, despite it being one spouse's debt only.
Joint credit cards can cause problems too.
With a joint credit card, the debt is inevitably shared but in many cases one party is unaware of how much the other is spending and does not see the monthly statements.
The CCCS often sees cases where people have found that their partner has run up secret debts on joint credit cards.
"In some instances, the partner has left the relationship, leaving the one who did not run up the debt to pay for it," said the spokesman.
www.myvesta.org.uk
LONDON (Reuters)
posted by Your Friends @ Myvesta.org.uk at
3/09/2006 03:16:00 pm
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