ICM Research was commissioned by the Co-op Bank to study couples who hide debts from each other. The results revealed that 13 percent of couples have secret debts, some of which represent major sums of money. Is it wise to hide debts from partners? Can secret debts be repaid through debt management plans? These are some of the questions that experts within the field are asking. Read on to learn the answers because these might change your thoughts about sharing debt news with a partner.
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Keeping debts secret appears to be a generational issue. Research reveals that couples age 34 or younger may hide large sums of debt from each other, beginning in the student years. Couples who are older than 34 usually keep fewer debt secrets and owe smaller amounts. Large debts may result in severe voluntary or creditor-imposed debt resolution techniques such as bankruptcy. At this point, it would be difficult to continue hiding the sums owed.
Partners with joint debts and joint homeowners must be most careful when keeping debts a secret. Experts recommend that they seriously consider informing their partners of the situations. If even an Individual Voluntary Arrangement (IVA) is used, the other partner may be impacted. When the debt situation worsens to the point that bankruptcy is the only option, partner interests will be jeopardized most seriously.
Joint homeowners entering an IVA or becoming bankrupt may be required to release equity in the home.
In the most serious cases, this will require selling the property. If a loan is held jointly by the partners, the individual who is not insolvent will be fully responsible for the entire amount due, not just half of the debt. This can create an enormous financial burden that can strain not only the household budget but also the relationship.
Taking steps to avoid insolvency is a smart move and there are many ways to do it. Informal debt management plans do not place the home in jeopardy. Though the partner who jointly holds a loan must make the full monthly repayment, the other partner will make a contribution each month through the debt management plan instalment. This will result in the loan being paid off more quickly and not entirely by the partner who is not experiencing financial problems.
An individual is not required to inform a partner of using a debt management plan to handle financial difficulties. However, if the debt is held jointly or a creditor has already pursued legal action, the partner may still learn of the debt. Therefore, it is better to be proactive and inform the other individual as soon as financial troubles arise.
Debt advisers tell their clients to inform partners before beginning debt management plans. Though this may seem like a painful admission, partners are typically more supportive than expected. The elimination of guilt and additional support makes the effort worth it. While they are disclosing secrets, partners should also inform each other of secret savings accounts, which the study revealed have average balances of £10,000.