Can you take out loans on joint accounts without permission during divorce proceedings?

You may be able to take out loans on joint accounts during divorce proceedings; however, this could negatively impact your financial settlement.

For most people, debt is incurred to facilitate larger purchases such as cars and homes, as well as for everyday spending. Just as assets need to be assessed and divided during a divorce, any debt must be examined to determine who is responsible for its repayment.

Unless a freezing order is issued for a joint account during divorce proceedings, your rights and obligations remain unchanged. Therefore, your ability to take out loans in joint names during a divorce will be governed by the same rules as if you and your spouse had not decided to separate, until your settlement is agreed and your assets are divided. However, there are strategic considerations to keep in mind if you wish to manage your joint assets significantly while your divorce proceedings are ongoing.

It is advisable to seek legal counsel to navigate the complexities of debt division and joint financial obligations during a divorce. A lawyer can help you understand your rights, protect your interests, and ensure a fair distribution of both assets and liabilities.

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Loans in joint names 

Among the loans that you can take in joint names are secured loans, such as mortgages, as well as unsecured loans, for example, personal loans from a bank. Both spouses will be jointly and severally liable if they both signed a contract to this effect with the bank or any other lender. This means each party is liable to pay in full in the event the other is unable to do so. 

Alongside loans, you can also get joint bank accounts with an overdraft facility. In these cases, your freedom to deal with this is contingent on how it was set up in the first place: 

• Some joint accounts require both parties’ consent before one takes out cash or uses the overdraft. 

• More typically though it only requires the consent of one of the parties.  

In either case, one spouse can still run up debt on a joint bank account with an overdraft facility so long as both names are assigned to the account. The only way to disable this would be to contact the bank and request the removal of one of the names off of the joint account, which you might need to do as part of your settlement once you divorce. 

Where credit cards are concerned, the rules are slightly different. In the UK, it is currently not possible for two people to share the responsibility of paying and managing the credit card. As such, although it is possible to have additional cardholders on the credit card, only one individual can hold the credit card account and they sign the agreement and are fully responsible for any debt incurred.  

Issues to consider 

During a divorce, a thorough disclosure of your finances is typically required. While you may be able to make unilateral decisions, such as running an overdraft on your joint bank account, these actions must be disclosed. Any unreasonable dealings with joint assets can be considered during negotiations and may disadvantage your case.

The financial settlement after divorce will address both assets and debts, including loans taken in joint names. The starting point for marital debt (debt incurred for the benefit of the marriage, whether in sole or joint names) is to share it jointly, similar to assets. Individual debt may be regarded as the sole responsibility of the spouse who incurred it and kept separate from matrimonial assets, though proving this can be challenging. Taking a loan in joint names without consulting your partner might disadvantage your case, potentially increasing your personal liability compared to your partner’s.