Partnerships are some of the biggest decisions you’ll make in your life. Whether it is a marriage or a business partnership, you are entering into an arrangement where you share assets and responsibilities. What happens if one or both members are struggling financially? In a partnership you have joint financial obligations, even if that includes debt from before you entered into the partnership.
‘Til debt do us part
Because married couples are considered a single entity by law if they are married by community of property, both partners are jointly responsible for all finances and debt. Only those who married with a prenuptial contract in place are considered financially and legally independent of each other. Partners married by community of property, being a single entity in the eyes of the law, would both have to undergo debt review if one partner becomes over-indebted. This may be helpful for the partner who is over-indebted but can be a burden for the other. Both partners will be flagged at credit bureaus and will not be able to apply for any loans or further debt. On the other hand, this often means that the debt review process may be faster, since one partner may be able to make more significant monthly payments until both partners are up to date on their debt.
Non-matrimonial partnerships also have joint financial obligations
A business partnership, while not as exclusive as a marriage, is still a binding arrangement between two (or more) people. If both partners take out a joint loan account, the advantage is that they would quality for more than they would qualify for as individuals. However, the disadvantage is that if either partner defaults, both partners are liable for the debt and both of their credit records will be affected. If any of the parties do not have the means to pay their share of the debt, the others must make up the difference. With home loans and bonds, for example, if one partner must go under debt review, the other partner must as well, since it is impossible to put half a property under debt review. For more information about joint financial responsibilities or debt review, contact One Debt today.