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Catherine Furze

Find out what becomes of debt when the unexpected happens

Debt can be a tough topic to talk about, which maybe explains why more people are turning to the internet to try to find out what happens to it when something unexpected happens.

With the average personal debt including mortgages in the UK standing at £33,410 in March of this year, up by £1,767 since January 2020, debt issues are on the rise and are expected to get worse as the cost of living crisis deepens. According to Moneynerd, the total interest payments on personal debt in the United Kingdom during a 12-month period would have been £44,940 million, or an average of £123 million a day. In total, that works up to an average of £857 in interest payments for each person each year.

From tying the knot to leaving the UK to embark on a new life overseas, it's not easy to get rid of of debt once you have it. and more people than ever are searching to discover what happens to the money you owe during different life events.

Read more: Spiralling costs forcing families to use credit to pay essential bills

Credit management company Lowell has analysed Google search terms and advised on what happens:

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. Debt is not inherited by your loved ones in the UK, and when someone dies their debts will be paid out of their estate, which is what is left behind after your death, including money, property, or possessions. You aren’t automatically responsible for the debt of your husband, wife, or civil partner when they die unless it was a joint debt and 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 unless 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.

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. 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 the money in your home country. If you move abroad, avoiding debt could seem like an easy option, but it may result in worse repercussions in the long run. Ignoring debt while abroad could add additional fines and interest to your already accumulated debt, impacting your credit file and score. 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 you declare bankruptcy, your possessions, property, and other non-essential assets will be used to pay off their debts. A bankruptcy order usually lasts for a year and 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.

John Pears, UK CEO of Lowell, said: “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.”

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