A personal debt agreement does not settle your co-borrower’s position

One person's arrangement is not everyone's outcome

You are considering a debt agreement and one of the loans is in joint names. Before assuming the shared problem will be resolved, obtain advice about the other borrower's position. Your proposal concerns your circumstances. The person who signed with you may still face obligations that affect their finances and the household's ability to meet ordinary costs.

Identify who actually signed

Imagine former partners sharing a personal loan, with one now seeking a debt agreement. Gather the loan documents, current statements and any agreement between them about payments. Distinguish a private understanding from the lender's agreement. Saying that one partner took responsibility after separation does not establish that the lender released the other person from the loan.

Check the joint debt guidance

AFSA states that joint debts can be included in a debt agreement but a creditor can still pursue the other person for the debt. Discuss the actual loan and proposal with an appropriate adviser. Do not promise the co-borrower that your arrangement will protect them, or assume that the amount shown in your proposal is the limit of their exposure.

Source: AFSA: What debts does a debt agreement cover?

Keep the household calculation honest

If you still share expenses, assess what happens if the other borrower must make payments on the joint loan. Avoid counting the same income as available for both the proposed agreement and the entire shared debt. In the former-partner example, separate budgets may be needed. Each person should understand their own commitments rather than relying on an informal combined total.

Allow independent advice where interests differ

Give the other borrower accurate information through an appropriate channel, without promising a result or pressing them to sign a new obligation. They may need their own advice about the loan and any proposed arrangement. Ask your adviser how payments by either person should be documented and reflected. Do not invent credits or releases from an assumed division of the debt.

Compare options with the shared loan visible

Include the joint obligation when discussing bankruptcy, a debt agreement and other available approaches. Ask which consequences concern you and which concern the other borrower. Keep any confirmed lender arrangements in writing. A workable personal decision needs to account for the people and obligations connected to the debt, even when only one person is making the proposal.