When two people take out a joint debt together, and both people sign the credit agreement, they enter into a ‘Joint and Several Liability‘ agreement.
Joint and Several liability provides the creditor with the assurance that each of the signatories to the agreement will be held 100% liable for the full outstanding debt, in the event that one of the signatories is unable or unwilling to continue making the scheduled repayments.
Joint and Several liability agreements can be any type of credit agreement, and can be secured or unsecured, but most common occurrences would include mortgages, joint bank accounts and joint bank loans.
Other examples of Joint and Several Liability credit agreements would include joint tenancy agreements, Council Tax and secured loans taken out on jointly owned properties.
‘Joint and Several Liability’ only applies to debts which have been taken out by more than one signatory, and does not necessarily include agreements where there are two card holders for say a credit card.
In the vast majority of cases, Joint and Several liability agreements are repaid in full and without any difficulties.
But, in the event that a Joint and Several agreement cannot be maintained, the creditor has reserved the right, as part of the original agreement, to chase each signatory independently, for the full repayment of the outstanding balance of the defaulted agreement.
Both signatories are fully liable for the total outstanding balance.
In the event that one signatory refuses or is unable to repay - the full debt falls on the other signatory.
Reasons for one signatory not being able to maintaining a joint debt may be due to them entering into an IVA or being made bankrupt.
In either case, be it an IVA or bankruptcy, the insolvent signatory would have their liability completely removed by the insolvency process, which would leave the remaining signatory 100% liable for the remaining outstanding balance on their own.
They, in turn, would need to make suitable arrangements with the creditor to deal with their liability for themselves, as they would now be solely liable for the full repayment of the outstanding debt.
Depending on their financial circumstances they could arrange regular monthly payments to the creditor by themselves, or alternatively, consider an insolvency procedure such an IVA or bankruptcy of their own.
Call 0800 088 7503 to ask a debt expert any technical questions you may have regarding IVAs.
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