Recently separated - debt solutions Debt solution case study
Summary: Recently separated - debt solutions - this paper explores the issues that couples face with regard to debt solutions if they separate as a couple.
Anton and Alice have decided to end their relationship and make fresh starts to their lives. They reason that despite the affect on their 2 young children, in the long run, it's in all their interests to separate. The financial implications though, are difficult. With joint debts of £20,000 and increased costs through separation, nothing is financially straightforward.
Who owns the debts?
Anton and Alice may come to their own arrangements as to who is paying what, but legally speaking the person whose name is on the debt is legally responsible for it. In the case of joint debts, each is responsible for all of it. If one is secondary cardholder - it is the primary cardholder that is responsible (whose name will be on the statements). Anton may agree to repay the joint loan or even a credit card in Alice's name, but Alice needs to be aware that if payments are not made, it is against her that creditors will take action.
If Alice is bearing the responsibility of looking after the children, she will need to ensure all benefits are being claimed and that Anton is contributing to the costs through child maintenance - either through CSA or a reasonable private arrangement.
Despite the fact that there are joint debts, it won't be possible for Anton and Alice to present a joint solution. Whether bankruptcy (or a Debt Relief Order) or an IVA or a Debt Management Plan is the right solution - each will need to present their new individual circumstances. Joint debts will need to appear on both solutions.
Changing circumstances and a temporary solution
It van of course take a little while for the dust to settle after a separation. For Anton and Alice, they both had to relocate as neither could afford to live in the matrimonial home. There was a dispute about division of assets and Alice found the process of establishing benefits entitlement to be more complicated than expected. Meanwhile the creditors were demanding payments that were scarcely affordable. For both Anton and Alice the temporary solution lay in a repayment plan. Alice managed to come to arrangements with her creditors, including the joint ones, on her own. Anton put his debts into a Debt Management Plan knowing that the situation would be clarified once the financial arrangements were settled and some things were more stable. Then - each would take further advice on the range of options open to them.