How to Stop a Break-Up Turning Into Financial Disaster
If you are currently loved-up, you probably do not even want to think about the possibility that the relationship will end. Unfortunately, this is something that you need to consider if you are contemplating joint finances as a break-up can result in debt or even bankruptcy if your partner later defaults on loan repayments. With this in mind, how can you protect yourself against the financial disaster that could be triggered by a relationship breakdown?
Think twice about joint finances
Ideally, you should shy away from having joint finances. It may seem entirely natural to take out a joint loan when you are in love and envisage the relationship lasting forever, but things can quickly snowball if the relationship then falls apart. It is not uncommon for ex-partners to all but disappear off the face of the earth and default on loan repayments, leaving you to pick up the pieces and cover his or her half of the repayments as well as your own. In many cases, this has led to significant debt for the victim. In the more extreme situations, it has even resulted in bankruptcy. Many couples who live together have joint bank accounts, but financial experts stress the importance of keeping credit separate wherever possible.
Get unofficial loans in writing
If you decide to loan money to your partner on an unofficial basis, get the agreement in writing. To cover yourself, have a solicitor draw up a signed document such as a formal loan deed so that you have something to prove that you are owed money.
Close joint accounts
Do not leave your money in a joint account if you are no longer romantically involved. Once any outstanding bills have been settled, either close the joint account or transfer any money that you have paid in to your own bank account to remove the possibility that your ex-partner will empty the account and leave you with nothing. In addition, contact your suppliers to request that your joint bills are terminated, especially if one of you has moved out and no longer lives at the address.
Request that 'associations' are removed from your credit report
If you apply for joint credit with a partner in the UK, he or she will feature as an 'association' on your credit report. This usually means that your credit report contains links to his or her credit report. If he or she has a poor credit history, this can have a negative impact on your ability to secure credit in the future. Fortunately, you can request that any 'associations' are removed from your credit report as long as you can prove that you have no on-going financial ties binding you together. Contacting the relevant credit reporting agency is a good way of requesting that financial 'associations' are removed from your credit report.
Register items in your name
If you are applying for loans to buy assets, do not allow the asset to be registered solely in your partner's name. For example, if you are taking out a joint car loan, make sure that the car itself is registered in your name. If the relationship later sours, you will then have the option of selling the car and are not left making loan repayments on a car that you do not actually own. If your ex-partner later defaults on his or her share of the repayments on a joint loan, he or she will not be in a position to sell the car and make a profit while cleverly defaulting on the repayments. If you take out a joint loan but register the car in your ex-partner's name, he or she can effectively default on his or her share of the loan repayments while selling the car, and the creditors will chase you for this money if they cannot extract payment from your ex-partner. Because of this, it is in your interests to have the car registered in your name if you are contributing to the loan repayments, especially if you will be contributing more than half of each repayment.