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Debts within marriage and de facto relationships

You are not automatically responsible for another person's debts, just because you are married to them or live in a domestic partnership (de facto or same-sex relationship) with them. This is true whether the debt arose before, during or after your relationship.

However, there are several ways in which you can make yourself responsible for your partner's debt. Think carefully before doing so, especially if the arrangement is one which will not benefit you.

The ways are:

  • If you enter a contract as a party. For example, if you are a co-borrower with your partner in a loan contract or mortgage, you will be legally responsible to pay the money as well as interest and any other costs provided in the contract. If you borrow jointly (as is usual), then each of you is responsible for the whole amount, not just half each. This means that if the repayments are not made on time, the lender can sue either or both of you for the full amount of the loan. The fact that your partner is the only one who really benefited from the loan (for instance because you borrowed jointly to buy a car for your partner, and your partner has now taken off with the car) does not make any difference. You can still be forced to pay the whole amount. If the lender thinks that you are more likely to be able to pay, they might choose to let your partner off and just sue you. Of course, not all loan contracts are the same. It is wise to get legal advice on the contract before you sign.

  • If you guarantee the debt. Sometimes, a lender will ask a borrower to arrange a guarantor, before they will lend them money. This is often done where the lender is not convinced that the borrower can pay back the whole loan. They are looking for someone else whose assets can be used to pay the debt, if the borrower does not pay. A guarantor volunteers their own assets in case the borrower fails to pay. Usually, a guarantor can be required to pay the whole amount of the loan as soon as there is any default. It does not matter why the borrower has not paid, or that they still have the ability to pay - the lender can choose to get the money from the guarantor anyway. If the guarantor does not pay, the lender can sue them and sell any substantial assets they may have, or send them bankrupt. This arrangement is typical of a guarantee, but not all guarantee contracts are the same. If you are thinking about signing a guarantee, get legal advice.

  • If you permit your partner to enter the contract as your agent (that is, on your behalf), or by using your power of attorney. Commonly, for example, if you are partners in a business, traders or customers dealing with the business will understand that dealings with either of you include the other. For instance, they may enter contracts with either one of you on the understanding that they are dealing with the partnership. You are both bound, unless you make it clear that this is not the case. If you have been in the habit of dealing with any person or business on the basis that you will be bound by obligations incurred by your partner, and you change your mind about this, make sure that you let those persons know, otherwise you can still be bound. Similarly, if you give anyone your power of attorney, this enables them to deal with your assets and enter contracts on your behalf. It is a powerful instrument and you should think carefully before granting a power of attorney, see: safeguarding a donor's interest.
Debts within marriage and de facto relationships  :  Last Revised: Tue Mar 5th 2002
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