Talking about money isn’t the most romantic conversation to have with your partner, but it could end up saving your own pocket and your relationship.
Financial ties can be as harrowing as emotional ones – a recent survey found one in 10 have split up or divorced due to hidden credit-card purchases – so make sure you know how your partner’s finances affect you and look out for tell-tale signs they are hiding debts.
In a survey into credit-card spending habits, comparison website MoneySuperMarket found that of the 15 per cent who admitted to lying to their other half, a third (36 per cent) said this was because they knew they would be angry. A partner keeping their credit-card bills close to their chest is not necessarily a concern if you’re confident they keep on top of them, but if your household budget is under pressure, secret spending can easily spiral into a much bigger problem for the both of you.
MoneySuperMarket editor-in-chief Clare Francis says: “One of the worries about people who spend in secret is that they do so because they know they can’t really afford it and in the long run it just makes things worse as they can end up saddled with debt and with relationship problems. No pair of shoes is worth that!”
While you cannot be made to pay your partner’s debts, if you have any joint finances such as a mortgage, loan, or even a bank account with an overdraft, you need to be aware the lender will consider you both “jointly and severally responsible”. You are liable for the whole debt, not just half, so if your partner can’t or won’t pay, you can be pursued for the entire debt, whether you can realistically afford it or not.
“You may be directly affected by court action. For example, a charging order may be registered against the home if it’s mortgaged and your partner’s name is on the deeds,” says Jonathan Chesterman of debt charity StepChange. “If your partner was declared bankrupt, and there is equity in the house, you could find you’re forced to sell or buy them out.”
Your credit file and ability to get credit in the future may also be affected. If you have a joint debt, or have previously made a joint-credit application, your partner will show as an “association” on your credit file. If you later apply for credit in your own name, the creditor could decide to check your partner’s file.
Ian Williams of Debt Advisory Centre warns against signing up for joint-credit agreements without knowing all the facts, pointing out that 10 per cent of their clients say their debt problems were caused by a relationship breakdown: “It highlights the importance of reading contracts properly before you sign them. If you’re giving someone else the power to borrow money in your name, are you prepared for the consequences?”
With all these potential problems in mind, what are the signs that your partner is having money troubles?
Hiding letters and dodging calls will obviously raise some red flags, but there are other signs that your partner is struggling. People often forget that borrowing via a bank account is still debt but charges and interest rates on current accounts are among the highest available. If your bank suspects an account holder is in trouble, they may even take away the overdraft with little to no warning so anyone who finds they are constantly overdrawn needs to take a good look at their spending.
If your partner is constantly flashing the plastic to pay for everyday goods, this could also be a sign that they are failing to make ends meet. Taking out new credit to pay off existing credit is another giveaway that they aren’t coping, and if they are considering using a payday loan, sit them down and ask why. These loans are designed to cover one-off expenses until the next pay packet, but missed-payment charges and interest rates in the payday market are extortionate so the debt can quickly spiral out of control.
Working together to fix your debt problems is important. Be open and honest with each other and try to share the workload if possible. If you both have a grip on the household budget you’ll be in a much stronger position, particularly if either of you is hit with an unexpected obstacle such as falling ill or losing your job. You can protect each other against fixed debts such as loans and mortgages with life and critical-illness cover or income-protection insurance. Debt charities such as StepChange and Debt Advisory Centre will also help you deal with creditors, find ways to cut back on expenses and check for any benefits to which you may be entitled.
If you do split up, tell the credit-reference agencies and file a “notice of disassociation” on your credit record informing lenders you have no financial links to that person.
“They will probably not be the first on your list when it comes to spreading the bad news, but by separating yourself financially from a previous partner you are protecting your own credit rating for the future,” says Steve Rees of debt consultant Vincent Bond & Co, who explains that you should check your credit record at all three agencies at www.experian.com, www.equifax.co.uk, and www.noddle.co.uk to get the fullest picture as each may hold slightly different information.
Make sure you know your rights. You cannot be forced to cover a partner’s debt if only they signed the credit-card agreement, even if you are an additional card holder who helped build up that debt. If your partner dies with debts, creditors may be able to recover their money by making a claim against their estate, but they are not entitled to pursue you for payment from your own money. If your significant other dies leaving no assets, the debt is not recoverable and you should send a copy of the death certificate to creditors.
Case study: "He had been gambling on the quiet... hiding the debt for months"
Anne, a teacher from the West Midlands, only knew about her ex-husband’s debts when bailiffs arrived to take possession of their household goods.
Anne’s husband had built up debts totalling £70,000 over several years without her knowledge.
“We didn’t live a particularly lavish lifestyle – a couple of foreign holidays a year a new car every five years – but he pretended to be doing better than he was in his career, saying he had a promotion here or a bonus there.
“It was all false though and he had been gambling on the quiet.”
When Anne found out about the debt her husband confessed all.
“He had been hiding the debt for months – opening post in both our names and even saying the phone was out of order to avoid me picking up calls from debt-collection agencies,” she said.
Fortunately, Anne was able to keep the family home for her and her child but the relationship didn’t survive: “I had a lot of help from a debt charity and it took several years to extricate my finances from his but we are now divorced.”