Debt Life Line

A consumer can be liable for a debt even though they have not had the personal enjoyment of either the chattels or the money lent. A personal guarantee renders this possible. Relationship breakdowns are also a cause of alarm to many when one party realises that the lender is seeking full payment of the balance owing, from them.

• Joint debt is when two or more persons enter into an agreement to borrow. Usually it concerns spouses but more often than not includes defacto couples living together, partners out of co-habitation, parent and child. This is a different scenario from a guarantee being given but nevertheless the liability remains the same.

Each party to the undertaking is liable for the full extent of the debt incurred, or balance remaining. There is no provision to ‘split’ the debt or maintain that only some of the money lent was used and therefore not the other party’s responsibility. Each will be held liable for the total amount due however a creditor cannot receive more than that which is due.

• Guarantee. A guarantee is a warranty given by one party that another will meet and honour their obligations to the lender. In the event that the primary borrower defaults on the agreement then the guarantor is liable for the whole of the debt due. Guarantees are prevalent in the following instances:
  1. Parents guaranteeing a child who has no credit history and who would otherwise be refused credit;
  2. One partner offering to guarantee the payments of another partner who may be credit impaired.