Till Debt Do Us Part When Separating

Access to credit is now easier than ever and this has led to a culture of, ‘putting it on the plastic,' being seen as very much the norm in today’s society. Average household debt is around £8,000 per person in the UK, and this figure does not include a mortgage.

This level of personal debt is a common cause for disagreements when couples separate. A typical situation is where one person has a loan or credit card in the other’s name even though both benefited from the purchase that caused the debt. It could be a foreign holiday, house repairs, or even everyday purchases, such as clothes or social events.

It is quite a headache, and it is a familiar situation for one half of the couple to claim that this debt was an extravagance incurred by their ex-partner.

As a consequence, it is quite common for debts to be part of the negotiations for a financial settlement in a divorce or civil partnership dissolution.

Whether you are married or not, a solicitor can help to determine who should take on responsibility for the debts and many couples find that mediation or collaborative law can be a sensible way to resolve such disputes.

Generally speaking though, the debt belongs to the person whose name it is in. So, if a credit card is in your name, you are responsible for making the repayments, even if it was used by both of you. This is the case for any type of loan or debt.

Also, debts must continue to be repaid until a financial dispute has been formally settled by a court or mediation. In this situation, it is advisable to keep making the repayments to make it easier to borrow again in the future and not to get caught up in the detail of who had the new TV etc. After all, a county court judgment arising from an unpaid debt can harm your credit rating and therefore your ability to borrow in the future.

It is also worth knowing, that when a loan or a mortgage is in joint names, you would expect each person to be liable to pay half. In reality, you each owe the full amount as joint loans are subject to the principal of ‘joint and several liability’. If one of you does not pay, or is unable to pay, the other person could end up paying the full amount due, no matter how unfair this seems.

If there are disagreements about the reason for the loan or debt, the court can consider that as part of the financial settlement proceedings in a divorce or civil partnership dissolution.  

Extrapolating yourself from a partner can be complex, and this isn’t even accounting for the household bills. In this case, the person whose name is on the bill is legally obligated to pay.

It means that even if you have separated, it is important to agree who will be paying the bills, and if you are remaining in the family home, then it might be appropriate for the bills to be transferred into your name.

It’s a huge subject and not as clear cut as who benefited from a purchase. So for anyone separating, we strongly recommend getting third-party help and advice if you have personal debts in joint or sole names.

If you find yourself separating with joint household debts and have some questions on how to arrange the financial settlement, please call Jonathan Corbishley to book an appointment on 01246 293151 or email jc@familylawgroup.co.uk