Tony and Rania were married for 20 years but have since separated. Rania is a director of the family tiling business but plays no part in running it. She always signed documents for the business but was never sure what they were, trusting that Tony would not ask her to do anything illegal or risky.
Now the business is in trouble and the bank has started bankruptcy proceedings. Rania has just found out the family home is at risk. The reason? She signed as a guarantor, thinking she was witnessing Tony's signature.
It is not only underhand financial dealings by spouses that can result in trouble from relationship debt, otherwise know as sexually transmitted debt. According to the NSW Law Reform Commission, there are other examples.
The commission cites the case of a director of a company who suffered amnesia. The man's wife was given power of attorney. She was called into the bank to tend to some of her husband's business transactions and signed a guarantee for $200,000 for the business. The bank did not explain the guarantee or tell her to seek legal advice. The effect of the guarantee was to secure the loan against the family home. The bank knew the business was in difficulty but did not tell her. A year later it demanded repayment of the company's debt secured by the signed guarantee. Eventually the family home was sold and the bank withheld money over and above the mortgaged amount.
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