Am I Responsible For My Ex’s Debt Following a Divorce?
Considering that the average household financial debt in the UK (excluding mortgages) is almost £10,000, it is important to consider how any debts will be treated upon separation.
Working out what is to happen with matrimonial debt can be a significant emotional and stressful time, especially if the debt incurred is from an ex-partner.
In this article, we will look at what the law says about dealing with debts during a divorce and ways you can separate them in a fair way alongside measures you can take to protect yourself in the future.
How is debt divided in a divorce?
Most assets that have been acquired or built up during the course of the marriage will be added to the ‘matrimonial pot’ upon divorce, which is then divided up fairly between both parties.
This is of course only the case if a prenuptial agreement wasn’t obtained before entering into the marriage.
Any debts which have been accrued during the marriage will need to be deducted from the matrimonial pot.
As a general rule, it will not matter if the debts were accrued by an individual spouse or if they are joint debts; any liabilities built up during the marriage will simply reduce the overall level of assets which are then divided.
If liabilities are higher than total assets, the divorcing couple will need to come to an arrangement about how to deal with the ongoing payment of debts.
If there is an excessive amount of debt, it may be necessary for either or both parties to consider personal bankruptcy. But such a decision should not be taken lightly, as there can be significant repercussions.
Who is responsible for which debts?
Any debts taken out in the name of an individual will officially remain the responsibility of the respective spouse who took out the loan etc.
If they just have their own name on the lending agreement, the creditor will only hold them responsible for payment.
Joint debts (such as a joint mortgage) cannot easily be divided after divorce. Each former spouse will be responsible for the whole joint debt (including their former partner’s share).
Just as with assets brought into a marriage, the responsibility for any debts held by an individual spouse before they tied the knot depends upon the length of the marriage and whether finances are considered to be mingled:
- Passage of time – where either party brings debt into the marriage, the source of these debts will become less important as time goes on and will gradually come to be seen as part of the joint financial situation.
- The mingling of finances – where non-matrimonial debt ends up being intermingled with matrimonial finances over time so that it becomes difficult to distinguish one from the other. It is more likely that it will all form part of the overall matrimonial pot.
Do I have to pay my husband or wife’s credit card bills in the divorce?
A question we received from a prospective client recently was, “We are going through a divorce and are trying to sort out our asset split. He (the husband) says I should pay some towards clearing his credit card. Does anyone know if this is the case?”
With regard to each other’s own personal debts and if the cards are solely in your husband’s name then you are not liable for them to the credit card company.
However, a court could order a payment towards them if he could prove that the debts were jointly raised and you should bear some responsibility.
Again, this would also be dependent on whether you had sufficient assets of your own to contribute.
This arrangement would be dealt with by what is known as a lump sum order.
Frequently Asked Questions
What happens to debt incurred after separation?
In the period of time during which a married couple has separated but is not divorced, it is possible for each spouse to accrue significant debt.
However, there is an element of reasonableness, eg. if one spouse is obviously whittling down the matrimonial pot by excessive spending, the court may decide they are entitled to a lower percentage of the matrimonial pot.
Are all types of debt treated the same by the court?
Mortgages are normally considered differently from most other types of personal debt.
The equity in a mortgaged home will generally be added to the matrimonial pot but the amount to repay on a mortgage will not be deducted (since it will not be owed if the property is sold).
However, deciding what to do with a matrimonial home will be one of the biggest questions upon divorce.
What powers do the courts have in relation to debts and divorce?
The court has limited powers in terms of dealing with debts upon divorce. It cannot reassign individual debts because these will remain a contract between the individual spouse and the lender.
However, it can balance out a financial settlement to cater to the fact that one party will be lumbered with large debts (eg if they are less able to pay for these than their former spouse).
How can I prevent future disputes over debt with my ex?
Obtaining a court-approved financial order is a crucial step in ensuring that debts are properly taken into account in any financial agreement and preventing disputes from arising in the future.
As long as there are no joint debts remaining after divorce, it is possible to ask credit reference agencies to place what is known as a ‘notice of disassociation on your credit report, which essentially removes any previous association between credit files.