Your debts and divorce

Whose debts are they anyway?

If the debts are in your joint names then you’re jointly and severally liable for them i.e. you’re liable as a couple but you’re also liable as individuals.

Debts in the sole name of one party can however lead to dispute particularly if they’re substantial.

The starting point is that the person who incurred the debt is the person who’s liable. It may be that everyone’s ok with that but in many cases the debt has been incurred by one party to benefit the family as a whole (in their view) so not surprisingly they’re unhappy that they should be solely responsible for it.

While it’s inevitable these days that most couples will carry some level of debt in addition to their mortgage, there’s no doubt that for many married couples their relationship starts with debt as a consequence of the trend for extravagant wedding ceremonies. It’s increasingly common for a large chunk of the debt that needs to be sorted out on divorce to be borrowing still outstanding from the wedding celebrations!

Practical measures to record your debt

If you’re building up a necessary debt try and keep a clear record of what the money was spent on.

If you’re transferring credit card balances to take advantage of interest free credit, and keep some record of how the original debt arose.

If there’s an argument as to whether a particular debt should be seen as family debt, the question will always be asked about what the money was for.  Don’t forget that if one of you has a credit card account with the other as an additional card holder it’s only the original account holder who’s liable to the credit card provider.

Loans from family members are increasingly common. If the money is intended as a loan, make sure you have evidence of that (a handwritten and signed agreement is better than nothing).

Not surprisingly, family members who have given money to a couple are uncomfortable with the idea that their relative’s former partner should benefit from that money when they separate. That often means that when a separation or divorce happens relatives will try and argue that a loan exists even if there’s nothing to prove that.  Unless there’s clear evidence that there really was a loan it’s likely that the money will be viewed as a gift in court.