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Husband bankrupt – wife left with the debt

The story

In late 2012 Heather and Robert refinanced a $20,000 joint debt with their credit union.  In early 2013 Heather told the credit union Robert had declared bankruptcy and that they had separated.  The credit union did not remind Heather that Robert could claim against the loan protection insurance they arranged when they refinanced the debt.  Heather continued to pay both the loan repayments and Robert’s loan protection insurance premiums.

Heather was struggling to make the loan repayments and in 2014 asked the credit union for help.  The credit union was aware Robert was bankrupt and not contributing to the loan, but did not notice Heather was still paying Robert’s loan protection insurance premiums.

In 2015 Heather was almost at breaking point, and wrote to FSCL.  We referred the complaint to the credit union’s internal complaints procedure.


The credit union realised Heather had been unnecessarily paying Robert’s insurance premiums.  The credit union offered to refund the insurance premiums since Heather and Robert’s separation to Heather’s account ($1150) and pay Heather $500 for the stress and inconvenience caused by its failure to notice the unnecessary payments earlier.  Heather was not satisfied with the response and said she thought the credit union should write off the remaining debt.



Initially the credit union was reluctant to write off the debt.  The credit union said that only Robert could have claimed against the insurance.  Even if the credit union had reminded Heather about the insurance in 2013, her relationship with Robert had soured and the credit union considered it unlikely that Robert would have claimed against the policy. 


FSCL’s review

We felt the credit union could do more to resolve Heather’s complaint.  As soon as the credit union was aware of Robert’s bankruptcy the credit union could have reminded both Heather and Robert about their insurance cover, and encouraged Robert to make a claim, saving Heather thousands of dollars.  We asked the credit union to reconsider its settlement offer. 



On reconsideration the credit union felt the right thing to do would be to write off Heather’s remaining debt, almost $6,000.  Heather was very appreciative and greatly relieved at the credit union’s compassionate response.