Splitting Up A Joint Loan Following Divorce?

Cantdance_2

Hope someone can help! Does anyone know if it is possible to split in two a loan which was taken out in joint names?

I've spoken to Northern Rock and the call centre advisor told me it wasn't possible, but I'd be interesteed to hear other opinions.

My problem is that I have a £30,000 joint loan with my soon to be ex wife, and another for £18,000. We've verbally agreed to take responsbility for half each, but I'm in a position where my parents are going to lend me the money to pay off my half.

Unfortunately my wife will be very much worse off financially when we divorce, and there is a very real chance that she will default on the loan by entering an IVA or going bankrupt.

Even if I pay my half of the loans off with money from my parents, I'm still liable for whatever's left so my financial situation will also go down the toilet!

Any advice gratefully received!

James

Rikki

You are both responsible for the loan. Joint and severably liable.

Even if you pay off half the loan you are still responsible for the remaining half. In the eyes of the lender they collect the money from who ever can pay regardless of how much you have already paid.

If your ex-wife defaults they will come to you for the money and visa versa.

Cantdance_2

Okay, thanks for the clarification.

So basically, if my wife can't pay her half of the loan, there's no point me paying off my half because I will still get defaulted if she fails to make her payments on it.

The easiest thing would be if she could get accpeted for another loan somewhere for her share, with a better interest rate... but her credit rating is not good.

Rikki

Its definitely not worth you paying off a lump sum.

Its not a case of she defaults. Its if the payments are not made in full you are both considered to be defaulting. The loan is not divided into portions. Its just one loan with two people responsible in making sure the payments are made in full. If one doesn't pay the other is expected to make up the short fall.

Personally I would wait an see how the situation goes following the divorce and the court judgments.

jonesMUFCforever

Op says that he has joint loan for £30k and £18k.
I take it the first loan has PPI on it? because CCA only protects banks up to £25k
So if they have PPI have they investigated whether it covers them for divorce?
I know that LTSB PPI would cover in this instance - provided loans were taken out before divorce proceedings began.

Worth a shot?

Mikeyorks

Do you not have joint equity (normally house) which can primarily be used to settle / offset the joint debts. Notwithstanding any desire to split joint assets to establish new 'deposits' or whatever ..... the commonsense is to satisfy the joint debts first.
Otherwise you are potentially lumbered with the whole, in due course.

Cantdance_2

Thanks for the replies guys!

The £30,000 loan was taken out with Northern Rock as an unsecured loan which we got as part of a deal when we remortgaged.

Basically it's 6% over 25 years, same terms as the mortgage. I know, I know, awful but the idea was that the house prices would grow sufficiently over the next few years to be able to roll it into a new mortgage when the current deal ended.

We have put the house on the market, it's worth about £155,000 - our mortgage is £137,000 so by the time we've paid fees etc it will probably leave us about £10,000 to pay off that £30,000 loan.

Unfortunately once you repay your mortgage, if you continue with the additional loan they change all the T&Cs and they then charge you a variable rate on that loan, currently 17.6% - and still at 25 years... :eek:

So, yeah, it pretty much sucks. Looks like our only options are to each try and get individual £10,000 loans and pay it off, or to keep paying it until our credit ratings are good enough to do so.

tightfistedmoneysaver

I'm in same position for lower amount of money and my ex will not pay his half on balance of remaining loan. I thought like you if you paid your half to lender that that left the ex owing balance remaining...why is this not so! I think law should change here it is unfair and unreasonable when you like me are willing to settle up fair and squarely the 50% share that you borrowed.

Maybe you could continue with payments but insist your wife pays you by way of standing order to cover her share?