Married couple - single debt solutions Debt solution case study
Summary: Married couple - single debt solutions - this article explores the options open to one party within a couple to propose a debt solution.
Background
Simon and Sarah have been together for 6 months. Simon is meticulous with his finances, whilst Sarah has always struggled to keep debts under control. Now together in a rented house, Simon is concerned about the impact of Sarah's debts on him, and how they are going to organise their finances fairly.
Separate salaries
As far as debt solutions are concerned, it is recognised that as Simon and Sarah are both working, they each have their own salary. Sarah's £15,000 debt was accrued way before Simon appeared on the scene so he cannot have benefitted from them. Sarah can afford to repay her debts contractually, but only if Simon paid all the rent and bills. They agreed that this was not a fair arrangement. Simon earned more so it seemed better to divide household bills proportionate to the size of their relative incomes.
Potential debt solutions
Once Sarah agreed to pay her fair share of household bills, plus her own personal living expenses - food/clothing, health, travel, social etc she didn't have enough remaining income to meet contractual repayments on her debt. After researching options - she concluded there were 3 main options - bankruptcy, an IVA or a Debt Management Plan (DMP). None of these options would have a direct impact on Simon and his income couldn't be used to repay Sarah's debts
In a single debt solution why are joint details required?
Sarah opted to propose an IVA. It provided her with a fixed point end to her debt and legal action from creditors. Simon was alarmed to discover that details of his income and outgoings were requested and evidence required. It was pointed out that in order for Sarah's available income for the IVA to be established, creditors would need to know that the household finances were indeed divided fairly. Simon relaxed once he realised he was not funding Sarah's debts. Joint income was calculated and joint outgoings were listed. It left a balance of £350/mth. From this balance, due to Simon earning as higher salary it was calculated that £200 was Simon's share of that disposable income and ring fenced. Sarah's share was £150/mth which was the amount she has been asked to pay into the IVA.