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 will be held fully liable for the 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 without any problems, therefore never creating an issue for the signatories.
In the event that a Joint and Several debt cannot be maintained, the creditor reserves the right to chase each or both debtors independently for the full repayment of the loan.
Both signatories are fully liable for the total outstanding balance.
In the event that one signatory refuses to repay - the full debt falls on the other signatory.
Reasons for one signatory not maintaining a joint debt may include entering into an IVA or being made bankrupt.
In either of the above scenarios the signatory concerned would have their liability removed by the insolvency process, and it would be up to the other party to arrange a suitable agreement with the creditor, as they would be solely liable for the repayment of the debt.
Call 0800 088 7503 to ask a debt expert any technical questions you may have regarding IVAs.
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