Till debt us do part

The end of a relationship is harrowing enough but once the hearts and flowers have disappeared, the last thing you want is a mountain of debts and bills. Approximately half of all marriages in Britain now end in divorce - and that means financial heartache for many. In fact, the monetary cost of splitting may even exceed the emotional pain. There are ways to minimise the financial hurt, but because two cannot live as cheaply as one, separating your financial relationship simply and quickly should be a priority.

If you have taken out a credit agreement, loan or have a bank account in joint names then you are both liable for the full amount of any debt. This is known as 'joint and several liability' and also applies to rent arrears on joint tenancies, arrears on joint mortgages, council tax payments and water charges on properties that have been jointly occupied. The key thing is whether or not you signed a joint agreement. Generally speaking, you are not liable for your partner's, or anyone else's debts, unless you signed an agreement or acted as guarantor. The two main exceptions to this are council tax and water charges. It is worth noting that regardless of the terms of your divorce settlement, creditors will still pursue you both for outstanding debts in both your names, even if one of you agreed in writing to pay them off.

Don't bank on it

For starters, that joint account might have seemed like a caring sharing move but if you reach the stage where you cannot trust your partner then it could give you cause for regret. Limitless, single-signature withdrawals mean that the account could be drained by either one of you leaving the other with a nasty shock. Worse still, if one partner goes overdrawn on the account then both of you are liable for the debt. It may not be as romantic but many couples opt for the 'three pot' system for this very reason, keeping their own individual accounts and having a third joint account for the mortgage and shared bills. If your relationship breaks down, you can then close the joint account and advise your bank on how bills will be met in the future.

For similar reasons, separate savings accounts give you each more control and in a modern age of internet banking, transfers can be made between accounts in a few seconds, when needed.

Remember that if you do decide to have joint accounts which then need closing, the bank or building society is not obliged to convert the joint account into a single one or offer you a new account of your own if they feel that your financial position is not sound.

Credit with some sense

Think twice before you allow your partner to share your credit card account. Remember that you, not they, will be legally liable for all the transactions - and debt. If you apply for any loans or credit in both names and your partner skips town then you will be the one faced with paying back the money.

But it is not just future debts which may bring bad news. Past problems could still haunt your credit rating file. If you marry or even live with someone with current or past debt problems, their record could affect yours whether you apply for joint or individual credit. Credit referencing will take note of everyone who is living on your property and any negative associations could affect your score, even if you have an exemplary history. This could also include parents, children of adult age or even flatmates. Lenders claim that this information helps them get a more complete view of how much financial pressure you are under. Shocking stuff. The good news is that the rules on using information about other people are changing and, in the future, financial information about other people will not be included on your file. After these changes have been made, only your own credit history, and that of anyone you share a financial responsibility with, will be provided to a lender. In the meantime, you can get your mitts on the files and make sure that any inaccuracies are deleted. You can also 'disassociate' yourself from a crooked flatmate or family members with expensive habits - something which the credit reference agencies will be able to arrange if you do not share a financial connection, such as outstanding joint accounts or judgments. If you are tempted to take out credit on behalf of a partner or relative who has been refused credit then remember you will be liable for the debt.

Home alone

Of course the biggest debt you agree to share is your mortgage. If you take it out jointly then you will be jointly liable for the debt. Talk to your lender as soon as you think there will be a change in financial circumstances. It is crucial to keep lines of communication open with your lender so that they will view your circumstances sympathetically if you need their help. If you find that your partner is refusing to pay their share of the monthly mortgage payments and you are able to meet them on your own for a short period, make sure you keep evidence to prove what you have contributed. If you are unable to meet the payments, you should have urgent talks with your lender. They may be able to reduce your payments or provide a payment holiday for a couple of months to ease the transition. If arrears have built up but payments can be resumed, the lender may agree to spread the outstanding debt across the whole of your loan. Another alternative may be to alter your mortgage, changing the type of repayment option or extending the length of the term, although these options will depend on your age and financial circumstances.

If you are married and believe you are entitled to a share in the value of your home, consult a solicitor about registering a charge on the property with the local Land Registry office to ensure that your spouse cannot sell the home or re-mortgage without your consent.

Debt after death

When someone dies, debts are recoverable from any assets or money left behind - what is known as the 'estate'. No one else has to pay for the debts unless they are already liable under the terms of the original agreement and the debt is in joint names or someone has signed as a guarantor. Creditors have to wait until the estate is sorted out, then ask for payment. You may have to negotiate payments to avoid losing your home, if the house forms part of the estate and could be sold to pay the debts. However, if it is clear that there is little or no money in the estate, write to the creditors and suggest they write off the debt.

If this article is relevant to you or someone you know, please visit www.bestdebtsolutions.co.uk for free and impartial advice.