If you are considering a debt management solution such as a debt management plan (DMP), you need to understand which debts can be included. We consider what happens to debts which are not in your name.
Legally speaking, in the UK you are normally only responsible for debts which have been taken in your name alone or in your name jointly with someone else.
For this reason, if you get into trouble and decide to undertake a DMP, you can only include debts in your name.
Debts in the name of a third party such as your spouse or partner cannot be included.
For example if your living with your partner and a utility bill such as the electricity or gas is in their name, any arrears on this account cannot be included even though you benefited from the use of the utility.
Debts taken out for you by someone else
If you have had the benefit of a credit card but the debt is not in your name, any debt you have incurred cannot be included in a debt management plan.
For example if you have simply been added as a card holder to someone else’s credit card account, this debt is not in your name.
In the same way, if a family member or friend has taken a loan on your behalf and given you the money, because the debt is not in your name, you can not include it in your debt management plan.
This may cause a problem as it is likely that you are paying your family or friend each month for the loan and as such you will want to maintain this payment.
However, your other creditors will not normally be happy with this and some arrangement to reduce the amount you pay to your family may have to be made.
Joint debts
If you have a debt which is in joint names with your spouse, partner or someone else, this debt can be included in your debt management plan.
However, you should be aware that the other party will still be liable for all of the debt. If you agree a reduced payment plan with the creditor, they can still chase the other named party for full payment
If you have a debt which is not in joint names but someone else is paying it your behalf, this debt must be included in your debt management plan.
There is no reason why they cannot continue make payments to you towards the debt. However this would simply form part of your income calculation and would not be specifically attributed to paying that debt.
Personal guarantees
The one area where a debt many be included if it was not taken in your name is if you have given a personal guarantee that a third party loan will be paid. This often happens if you have been running a business and have had to guarantee a business loan.
If the debt you have guaranteed is called in, then you will be responsible for paying it as if you had taken it in your own name. As such, this debt should be included in a debt management plan.
If you are considering a debt management plan or other personal debt solution it is very important to understand which debts you should include and what will happen to any other debts which you are associated with but are not in your name.
Very often carrying out a debt management plan will have implications on third party debts even if they can not specifically be included in the plan.
Tags: arrears, card holder, creditor, creditors, debt management plan, debts, electricity, family member, management solution, third party