What Happens to Debts on Divorce?

 

Whatever the circumstances, going through a divorce can be challenging for various reasons. Making this difficult decision often comes with the additional strain of resolving joint and personal finances as part of the process, which can understandably add an extra layer of stress and worry for some. Not knowing how your finances will be handled once everything is finalised can be scary, which is why we’ve put together this guide detailing all the possibilities for your money during a divorce.

In this article, we’ll delve into what happens to any money owed or due before, during and after a divorce. From supportive advice on managing any shared debts after a divorce to compassionate guidance on navigating your finances during this period, we’ve got you covered no matter what your situation looks like.

Divorce and debt – what happens to debts when you get divorced?

While there are many other things you might need to consider during a divorce, your joint and personal finances are also major and sometimes difficult aspects that will need to be dealt with. This includes any debts, regardless of whether they’re held in both of your names or just one.

If either of you has incurred any debts, whether it was before or during the marriage, you’ll need to check who’s legally responsible for these since this will affect what happens to it after the divorce. The person who signed the credit agreement is typically accountable for the debt moving forward. However, if you and your former spouse took out any joint credit arrangements, you’ll both be legally responsible for any debts linked to it. There are some exceptions and different factors that can play a role in who becomes legally responsible for debts in just one name.

In divorce cases, courts can divide debts when deciding how to distribute assets between you and your ex. They typically assess this on a case-by-case basis, although they’re likely to focus on whether the debt was incurred during the marriage and who benefitted from it.

Debts from during the marriage

For debts incurred during the marriage, the court will typically divide these in a way that they deem to be fair to everybody involved, including you, your spouse and any children in your care. Generally, the court will assume that any debts accrued during the marriage are joint debts, regardless of whose name they’re held in. If there is any question about who is responsible, the court will often start by trying to establish why the debt was incurred in the first place.

In some cases, such as when a partner has been hiding debts, you may want to persuade the court otherwise. To do this, you’ll need to provide enough evidence to prove that you were unaware of the debts. Where a debt has been incurred by one spouse during the marriage and that person has had the sole benefit of the debt, the court can determine that they should remain solely responsible for it.

Debts from before the marriage

Any debts incurred before the marriage are likely to be the responsibility of whoever’s name is on the credit agreement. While there are some circumstances where this might be less clear-cut, such as when debts have been incurred to benefit both you and your ex, for most debts this will be more straightforward.

Debts from after the separation

When money is owed or due after the separation is finalised, the courts will typically evaluate each situation differently. If the debt has been unreasonably incurred, for instance, through frivolous spending or gambling, the likelihood is that the court will hold the person who incurred the debt solely responsible.

For reasonably incurred debts such as rent payments on a new property after moving out of a shared home, the courts are likely to decide that the debt must be shared between you and your spouse. However, the courts will take various other factors into account here, including your individual incomes, savings and other financial commitments you might have.

Types of debts to consider during a divorce

Debts can be different for everyone. So to cover all bases, here are a few of the main types of debt you might need to consider when you’re going through the divorce process. Breaking your debts down into these categories can help with working out how to prioritise the finances after separation.

Mortgages

Whether you have a joint mortgage, or the property is in just one person’s name, you’ve likely been living together at this property. Because of this, it’s usually seen as benefitting both parties, which means that the responsibility could be split between you on divorce regardless of who is named on the debt.

If one of you plans to continue living in the property and paying the mortgage, the court will need to decide who is responsible for this financial commitment. If, for instance, the person who will continue to live in the property could struggle to cope with the finances alone, an arrangement may be put in place with the other person to ensure they don’t lose the home and that further debts aren’t accrued from associated bills. But if there will be no financial strain on the person planning to stay in the property, the responsibility will normally be passed to them.

If you and your partner have a joint mortgage on any other properties, these will typically be shared equally after the divorce.

Credit card debts

If you have a joint credit card, the debt will again normally be shared equally between you and your ex-partner. The debt from personal credit cards used to pay for anything that benefitted both of you, such as home renovations, furniture or holidays might also be shared. Divorce courts will look at the transactions to find out what has been purchased using the credit card to help them make their decision.

Car finance

Car finance is looked at similarly to credit card debt. So, if both of you benefitted from the car, whether this meant that you were both named drivers or it was used for your commute, the responsibility will be shared after divorce. Even if the car was only financed under one person’s name, the courts will still look at whether both used it to make their decision. If only one of you used it, the responsibility usually falls to that person.

Bank loans

Bank loans might have been taken out in both names or just one. But as we’ve mentioned above, the reason for taking the loan out and what it was used to pay for will be a factor which affects who needs to take responsibility for it.

Other debt types

Debts can come in many different forms, and so it’s important to note that other debts such as medical bills, energy bills, payday loans, legal bills and business costs might need to be considered during the divorce process. Hidden debts can also be brought to light in divorce courts. In this case, it needs to be proven that you had no knowledge of the debt and that it was for the sole benefit of the spouse who incurred the debt. If this can be achieved, it will be disregarded for the financial settlement.

Are debts shared in divorce?

It can be difficult to determine whether your debts will be shared in divorce. For some, it can be the case that all debts are shared equally, especially when all debts are in both names. As a general rule, the likelihood that they will be shared can be higher if both of you are named on the debt and the debts were taken out to benefit both parties.

However, since other factors can affect finances and some might have debts that are only under one person’s name, the debts may not always be shared equally.

How much does a divorce cost?

While every situation is different, there are usually other costs to consider when filing for divorce. These can include divorce lawyers, court, mediation and legal aid fees. You should also consider the financial settlement, child maintenance costs and the cost of housing after the divorce. Depending on your situation, the fees can cost upwards of around £700 [Source: Moneyhelper] and can stretch into the tens of thousands in more complicated arrangements.

More debt & divorce questions – answered:

Have more questions about what happens to debt in divorce? Below you can find some answers to some of the most commonly asked queries on this topic.

I’ve found out my ex-partner had secret debts – am I liable?

The short answer is no – but these situations will require you to prove to the divorce court that you were unaware of the debts and that your ex-partner was the only one in the marriage benefitting from the debt. If you can find a way to prove this, which a solicitor can usually help you with, you won’t be liable for their debts, and they will be excluded from the financial settlement at the end.

What do I do if my ex-partner is refusing to resolve debts cohesively?

You have a few options if your ex-partner is refusing to resolve debts cohesively. Appointing a mediator is usually considered to be the best way to work towards a fair resolution. Having a neutral third-party present can help diffuse any disagreements alongside making sure both spouses have an equal say in the proceedings.

If issues arise once the divorce is finalised, you can try to find financial support from an independent company or bank and put restrictions on accounts to prevent them from racking up further debts.

What happens with ‘soft loans’ during divorce?

If a loan was provided to you by friends or family to help with a difficult financial situation, this can often be referred to as a soft loan. However, these can be difficult to resolve in divorce due to a lack of legally binding paperwork. Because of these difficulties, any proof you hold that you both agreed to repay your soft loans should be presented to your solicitors.

Resources: Support for going through divorce

It can be tough going through a divorce, no matter how amicable or how comfortable your financial situation is. If you feel you could use some extra support or guidance, the resources below are here to help.

Divorce, relationships & debt support resources

MoneyHelper

MoneyHelper are a money service that can support with a range of money issues and concerns. From benefits and pensions to savings and family finances, they’re dedicated to helping people in the UK manage their money. For guidance on managing finances during a divorce, check out their divorce & separation hub.

DivorceClub

For advice from legal, financial, emotional, social and parental experts, alongside private support groups and useful resources, you might want to consider joining DivorceClub.

FamilyLives

FamilyLives can offer support for families going through divorce on their divorce & separation page. With live chat, a helpline and plenty of helpful guides, you can get tips on how to deal with the financial and emotional sides of divorce.

National Support Network

At UK Debt Service, we believe that everybody should have access to tailored and sensitive support, which is why we’re members of the National Support Network who are dedicated to simplifying support services. We work with the NSN to improve our debt support, which allows us to help those who might find themselves in financial difficulties because of divorce and separation. We provide free access to our Support Hub, where you can be signposted to a variety of support resources including apps, videos and organisations.

Whether you’re unsure of how your debts will be handled in a divorce court or need some extra support with managing your finances during this transition, we hope this guide has provided you with all the insights and information you need to feel more confident.

If you’re struggling with debt, speak to a member of our UK Debt Service team. We may be able to help you understand all options available based on your personal circumstances.