Setting up a debt management plan can lead to surprise repercussions. You may wonder, ‘will my debt management plan affect my partner?’ Cashfloat finds out.
- Your debt management plan will only affect your partner if you are linked financially
- Talk to an impartial debt advisor to find out how to minimise the effect that your DMP will have on your partner
Cashfloat short term loans provide a temporary solution to short term money problems. Short term loans should never be used to keep a debt problem at bay. What should you do instead? The answer to a debt problem is effective debt management. In order to help customers get out of the vicious cycle of debt, we have published this guide to debt management plans. In this article, we will answer another question that many people ask – will a debt management plan affect my partner?
Personal Relationships and Debt
Unfortunately, if it is not properly tackled, debt can have an impact on personal relationships. Couples, whether they are married or unmarried, can all be put under strain by debt. If you are worried about how your debts will affect your partner, you must address the problem and find a solution that will minimise the impact it has on your relationship.
While debt is always challenging, it is always possible to find a solution. By effectively tackling a debt problem early, you will be able to minimise or avoid it impacting your partner. In many cases, debt problems, when they are solved through a debt management plan (DMP), will not affect a person’s partner. It is important to seek help with your debts, and find an appropriate solution that will allow you to escape from debt, and minimise the effect it has on your partner.
Seek Professional and Impartial Debt Advice
Debt problems are always complicated and they are even more complex when a person’s partner may be affected by their debt. You should always seek professional and impartial advice before you attempt any debt solution. This is even more important if you are concerned about the impact it may have on your partner.
Fortunately, for people who are struggling with debt, there are now many free charitable organisations that will offer debt advice to them and also support them the whole way through their recovery from debt. If you are unsure what to do, the best thing you can do is contact one of them for support. Good organisations to contact are StepChange and National Debtline. No debt problem is unsolvable. The staff at these organisations are very friendly and have helped to turn many people’s lives around.
Be Informed
It is also a good idea to be informed on how debt solutions work and be as prepared as possible. This article will explain the basics of how debt management plans may affect a person’s partner. Read on to find out more.
When is Your Partner Affected by a Debt Management Plan?
If you are considering starting a debt management plan, you may be wondering whether or not it will affect your partner. With all the different forms of credit that people use in their lives and the many links that partners have to each other financially, knowing when one partner’s debts will affect another’s can become confusing. Normally, a debt management plan will only affect a person’s partner directly if they are financially associated.
Financial Association
Financial association happens when you take out certain financial products with your partner. This could be for a personal loan or a mortgage that is not included in a debt management plan. Alternatively, it could be for debts included in your debt management plan, such as payday loans, short term loans or credit cards.
Financial association you have with your partner, for debts you don’t include in your debt management plan, can affect your partner’s credit score. Generally, debt management plans only cover unsecured debts and, as such, you will only be able to include certain debts in your DMP. Often, joint debts which come outside of a DMP are mortgages and personal loans. When you take out any joint financial product, credit referencing agencies will record an association between you and your partner. The reduced payments you make towards the debts included in your DMP may show up in your partner’s credit report in connection to debts which are not included in your DMP. Their credit score may be affected because you are financially associated, even though these debts are not included in your DMP.
Debts which you include in your debt management plan, which you took out with your partner, on top of affecting their credit score, may also cause other issues for them. If your partner is jointly liable for debts which you include in your DMP, your creditors may pursue them for the debt. Sometimes, in this situation, it is advisable to take out a joint debt management plan. If this is a consideration you are making, it is worth discussing your case with a financial advisor.
Which Financial Links Will Not cause Problems?
One point worth noting is that if your partner is a secondary credit card holder for your credit card account, they will not normally be liable for your debts. Similarly, if they act as a guarantor for a loan that you have taken out, they will not normally be affected by your actions until they are required to make a payment as a guarantor. That said, it is a good idea for them to read the terms and conditions of any credit card or guarantor agreements they have made, to seek impartial advice and to know exactly how they might be affected. Being open and honest with your partner is the best thing.
Financial matters are complicated and the extent to which your partner will be affected by your debt management plan will depend on your joint circumstances and the nature of your debts. It is always a good idea to discuss your situation with a professional and impartial debt advisor.
If you are unsure whether you are financially linked with your partner, you can check by requesting a copy of their credit report. Any financial link which has occurred should show up.
Budgeting for Your Debt Management Plan May Affect Your Partner
As part of making a debt management plan, you will have to organise your own budget and work out exactly how much you can contribute to repaying your debts after covering your priority debts and living expenses. Problems are likely to arise if you cannot contribute towards your normal household share of priority debts and expenses and make contributions towards a debt management plan. In this situation things can become complicated and it is a good idea to talk things through with both your partner and an impartial debt advisor.
Can Your House be at Risk?
When entering into a debt management plan, people often wonder if their home could be under threat. Whether they own it with them or not, people who live with their partner are often anxious about how their DMP could affect their partner’s housing.
As debt management plans are an informal debt solution, they are not legally binding. In theory, your creditors can pursue court action against you to reclaim their money even after agreeing to your plan. In some situations, this could threaten your home. The extent to which your debts will threaten your home (if your creditors pursue legal action against you) will depend on your circumstances. A discussion with a debt advisor should help you get a clearer picture of the extent to which your home would be under threat.
However, in reality, after a debt management plan has been agreed few creditors will pursue legal action against a debtor. If you can make an agreement with your creditors and begin a debt management plan, you will make your mortgage payments (or any other payments for housing) before you make payments to your DMP. This is because these are your priority debts. After you have covered your priority debts and living expenses, you will make contributions towards your DMP.
Can Creditors Take Legal Action While You Are in a DMP?
In most cases, if you continue to make the contributions you agreed with your creditors in your DMP until your debts are cleared, they will not pursue any action against you. For the vast majority of creditors, it is better for them to accept your payments under a debt management plan than to pursue legal action against you. It is worth discussing the issue, if you are worried, with an independant debt advisor. However, most people who can arrange a debt management plan with their creditors and stick to it will not face any legal action and their home is unlikely to be under threat.
If, after beginning a DMP, you find that you are struggling to make payments or if you think that you might miss one, it is important to speak to your DMP provider as soon as possible. Clear communication between you and your creditors is vital while you are in a DMP. If you fail to make payments, this is when creditors are likely to pursue action against you. If you communicate clearly and early with them, you may be able to renegotiate payments to a level that you can afford.
What Should You Do About It?
There are some things you should consider doing if you may be starting a debt management plan and you are worried about how it will affect your partner.
Be Honest With Your Partner and Find Solutions
It is a good idea to be honest with your partner about the situation that you are in. One good piece of advice is to seek impartial advice and to be clear about how your debt problems may affect your partner. It is also very helpful to find a solution to your debt problems and ways to minimise the effect it will have on them at the earliest opportunity. No debt problem is unsolvable and everyone can find a way out of debt. Debt management plans are a debt solution which hundreds of thousands of people in the UK use and many of these people are financially associated with their partners.
Consider a Joint Debt Management Plan
In some situations it will be advisable to make a joint debt management plan. This is particularly likely when you and your partner owe money for debts covered in a debt management plan, which one of you is looking to start. Budgeting to cover priority debts and living expenses between two incomes can be complicated and it can be difficult to find the best approach. The best thing is to talk your situation through with your partner and an impartial and professional debt advisor. Some debt management companies may insist that your partner join a debt management plan which they do not want to. It is best to avoid these companies and to use a debt charity instead.
New Partners While in a Debt Management Plan
After you begin a debt management plan, if you become financially associated with someone else, this could damage their credit rating. It is advisable not to become financially associated with a new partner until it will not affect their credit rating. This is a consideration you should make before you take out any joint financial products.
Another consideration is that gaining a new partner, while you are in a debt management plan, may cause a change to your circumstances which could affect the payments you can make in your DMP. This is particularly likely if you move into the same house with them and begin to share expenses. Usually, this will reduce expenses, although for some people it will mean that they have less money available to contribute towards their DMP. Normally, you will be required to tell your DMP provider if this is the case and you will need to make higher payments towards your debts (this will mean you clear your debts more quickly). Alternatively, you may need to renegotiate lower payments with your creditors.
In some instances, this can lead to a situation where the debt management plan is no longer viable. For example, it might make you take much longer to clear your debts. Another debt solution may be necessary, such as an individual voluntary arrangement (IVA), a debt relief order or bankruptcy. It is worth considering whether this will happen before you make arrangements with a new partner, as it may be better to stick to making payments to your debt management plan.
In Summary…
Getting the right professional advice and help to deal with debt is the first step to financial freedom. Debt problems are always complicated and when they involve another person they can be even more so. We strongly recommend that you speak to a debt charity, such as StepChange, National Debtline or Christians Against Poverty if you are concerned about how your debt management plan will affect your partner.
Hopefully, the information in this article has helped you understand how one person’s debt can affect their partner. As we explained, a problem is most likely to occur when you have joint financial association with your partner and, if this is the case, it is important to address the problem and find solutions to it.
Debt and the stress it causes can have a major impact upon a marriage or partnership. If you can start a conversation sooner rather than later, it can help to cement your relationship instead of creating a rift that could damage or even end your relationship.
Chapter 8:
Do Debt Management Plans Ever Fail?
Chapter 10:
Does a Debt Management Plan Affect an Existing Mortgage?
