Joint and Several Liability

Joint and several liability is a form of shared legal responsibility in which each of two or more obligors is liable for the entire obligation, both together ("jointly") and individually ("severally"). The person owed can sue or collect from any one obligor for the full amount, or from several of them, and stops only when the total has been paid. It contrasts with several, or proportionate, liability, where each person is answerable only for their own share.

The Internal Revenue Code uses the phrase in the setting most households meet first. Section 6013(d)(3) provides that when spouses file a joint return, "the liability with respect to the tax shall be joint and several." The IRS's publication on innocent spouse relief puts it in plain terms: filing jointly "makes both you and your spouse responsible for the entire tax liability. This is called joint and several liability."

Liability to the creditor and fairness between the obligors are two different questions. Joint and several liability answers the first: the creditor may take the whole debt from whoever can pay. It says nothing about the second. A person who pays more than their share is left to recover the difference from the others, usually by a claim for contribution or under whatever agreement they made among themselves, and that claim is only as good as the others' ability to pay. The general partnership page makes the same point in the partnership setting: a creditor can pursue one partner for the entire obligation, and that partner must then seek contribution from the others.

Private allocations do not bind the creditor. Because the creditor's rights come from its own contract or from statute, an agreement among the obligors changes nothing on its side. The IRS says so directly about joint returns: you remain jointly and severally liable, and the IRS can collect from you, "even if you later divorce and the divorce decree states that your former spouse will be solely responsible for the tax." The Uniform Partnership Act (1997), the model partnership law, makes partners liable jointly and severally "unless otherwise agreed by the claimant or provided by law," meaning the creditor's agreement, not the partners', is what can narrow it. The same logic applies to a joint loan after a divorce: the lender is not a party to the decree.

Where a household meets it.

• A joint tax return. Both spouses owe the whole tax, including tax on income only one of them earned and any deficiency found later. Relief is available in defined cases under section 6015, explained on the innocent spouse relief page.
• Co-borrowing and joint accounts. People who apply together for shared credit are typically each contractually liable, which Regulation B defines as being "expressly obligated to repay all debts arising on an account."
• A shared lease. A lease may make each co-tenant responsible for the full rent. Whether yours does depends on its wording and on state law.
• A general partnership. Under the Uniform Partnership Act (1997), which states adopt individually, partners are jointly and severally liable for the partnership's debts. A limited liability partnership election changes that for debts incurred afterward.
• Guaranties by several owners. Business owners who each sign a personal guarantee may each be liable for the whole guaranteed debt, depending on the guaranty's terms, as the personal guarantee page explains.

The same doctrine appears in tort law, where each state sets its own rule for dividing damages among several wrongdoers. This page is about the debts and taxes people take on together.

When a jointly and severally liable debt goes unpaid, the creditor decides whom to collect from, and the obligors settle accounts among themselves afterward.

Take an example. Jordan and Priyanka, roommates, take out a $12,000 joint personal loan to furnish their apartment and agree privately to split the payments evenly. A year later $9,000 remains, and Priyanka moves out and stops paying. The lender can demand the whole $9,000 from Jordan. If Jordan pays it, the debt is satisfied and the lender can collect nothing more from either of them.

Jordan has paid $4,500 more than his half under the roommates' agreement, and he can try to recover that $4,500 from Priyanka. That is a claim between the two of them; if Priyanka cannot or will not pay, the loss stays with Jordan.

Under several liability the result would differ: each would owe the lender only their own share, $4,500, and the lender would have to pursue Priyanka for hers. A joint return does not work that way unless a spouse qualifies for relief such as separation of liability under section 6015; for a loan, the note's terms decide.

Pros

• Gives the creditor more than one source of repayment, which is why joint applicants can qualify together for credit neither could get alone.
• On a joint return it is the price of the joint filing status, which the married filing jointly page weighs against filing separately.
• Lets a group take on an obligation, such as a lease, that a landlord or lender would not offer to one person.

Cons

• Each person can lose the whole amount, including the share a co-obligor was supposed to pay.
• A divorce decree or private agreement does not protect you from the creditor; it only gives you a claim against the other person.
• A claim for contribution is worth nothing against someone who has no money or cannot be found.
• The exposure can outlast the relationship by years, as with a tax deficiency discovered after a divorce.