From marriage to moving abroad: here’s what happens to debt following different life events

· From getting married to moving abroad, credit management company Lowell has highlighted what Brits are searching for in regards to debt and different life events

· In the UK, when someone dies any remaining debt is paid out of their estate – which is any remaining money, property, and/or possessions.

Debt can be a tough topic to talk about, and it can be difficult to understand what happens to debt in unforeseen circumstances.

Credit management company Lowell has analysed Google search terms querying what happens to debt following different life events. Responding to the search terms, John Pears, UK CEO of Lowell has offered his guidance on what Brits should do if these issues occur.

1. What happens to debt when you die?

Search terms* for ‘what happens to debt when you die’ has seen a 60% increase in the last 12 months. When losing a loved one, Brits should be aware that debt is not inherited in the UK, and when someone dies their debts will be paid out of their ‘estate’.

An estate is what is left behind after your death, and includes any money, property, or possessions.

You aren’t automatically responsible for the debt of your husband, wife, or civil partner when they die [1] – you will only be liable if your name is on the agreement or account.

2. What happens to debt if you get married?

According to Google search trends ‘best joint account for couples, UK’ has seen an increase of 90% in the last 12 months. In the UK, you’re not responsible for your partner’s debts [2]. However, if you take a joint loan, mortgage, or bank account – then both names will be liable for any joint debts shared.

In the same way, while your spouse wouldn’t be liable for your existing debt, your bad credit score could have an impact on future financial plans, for example, if you wanted to take out credit together in the future.

3. What happens to debt if you get divorced?

Research conducted by Lowell in 2021 found that half of all Brits in a relationship have a joint bank account. However, a huge 47% of them feel like they were not given the right guidance or advice on what would happen to their account if they were to separate [3].

In a similar way to marriage, debt is only shared if the account was created in both names, meaning once you’re divorced you will only be liable for debt that is in your name. The research found that couples who don’t have joint accounts following a divorce, won’t inherit any debt. For those with joint bank accounts who have gone through a separation, four in ten (39%) found it very difficult to separate their finances.

4. What happens to debt if you move abroad?

Debt in the UK is not cleared when you relocate to another country and creditors might still take some action to try and recover money in your home country [4].

When people move abroad, avoiding debt could seem like an easy option, but it may result in worse repercussions. Ignoring debt while abroad could add additional fines and interest to your already accumulated debt, impacting your credit file and score.

You’re not alone and although it can be difficult, understanding the amount of debt you have is really important when facing the issue in front of you; moving abroad isn’t an escape route.

5. What happens to debt if you declare bankruptcy?

“What happens when you go bankrupt” saw a 23% increase in search trends in the last 12 months. For many, bankruptcy is seen as the last option that could affect your future financial situation for life.

Once Brits declare bankruptcy, their possessions, property, and other non-essential assets will be used to pay off their debts. In the UK, a bankruptcy order usually lasts for a year. After the order is over, most debts will be cleared and you won’t have to pay back the debts that the bankruptcy order covers [5].

Commenting on the findings, John Pears, UK CEO of Lowell adds:

“Life can be unpredictable, so we believe it is important for Brits to really understand what can happen to debt in a variety of different scenarios.

At Lowell, we are talking to our customers every day on issues that directly affect Brits’ credit, and are directing them to credible, trustworthy sources for support where it is needed.

We are also campaigning to improve financial education in this country so people properly understand what financial products and debt mean for them. Ultimately, the more you know about debt, the better prepared you are to manage it.”

Lowell recently published new research into the state of financial education in the UK, alongside the Centre for Social Justice. The report found people had a lack of understanding of basic financial products such as credit cards and that financial literacy was lagging behind Thailand and Albania. The report’s core recommendation sought a whole-life approach to financial education in the UK and improved provision in primary schools. The full report can be found here: https://www.centreforsocialjustice.org.uk/wp-content/uploads/2022/06/CSJ-The_financial_education_initiative.pdf

If you’re struggling with debt, always reach out for support to ensure you have been given the correct advice. Everyone is entitled to independent and impartial support and a helpful list is available at our website https://www.lowell.co.uk/help-and-support/independent-support/