debt divorce

For most couples, incurring debt is a necessary part of life in order to be able to fund the purchase of cars, houses and everyday spending. But what happens to that debt on divorce?

If a couple separates, it is crucial to account for each party’s debt, which will need to be added up and deducted from the assets of the parties when calculating the overall financial position. However, it can often be contentious as to who will be responsible for paying these debts after divorce.

Who is responsible for debt incurred during the marriage?

In order to establish whether both parties are jointly responsible for a debt, or whether one party should be solely responsible for a debt, it is necessary to confirm why the debt incurred.

Matrimonial debt on divorce

Regardless of whether the debt was taken out in the name of one spouse, or as a joint debt, if the debt was incurred for the benefit of the family (i.e. both spouses have enjoyed the benefits of the loan), then it is likely that both parties will be jointly responsible for the debt. It will need be accounted for within any settlement accordingly.

These “matrimonial” debts would typically include debts incurred to fund building work and improvements to the family home, family holidays or the family car.

Individual debt on divorce

If one spouse has incurred a debt and has had the sole benefit of the debt, then the court may regard this as one that the individual spouse should be responsible for, as part of any financial settlement. Therefore it should be kept separate from the calculation of the matrimonial assets.

These “individual” debts may include frivolous spending, such as funding expensive hobbies, holidays without the family or gambling debts. However, this is a very rare finding to make and often the costs incurred arguing the particular nature of debts can outweigh the gain of absolving a party of any financial obligation to repay them.

A court may also account for whether any debts incurred before or during a marriage.

If one party brought significant debt to the marriage, then it would be more likely that they would be solely responsible for these debts, in contrast to a spouse who incurred significant debts during a marriage, which are more likely to be regarded as joint debts.

What can I do if my spouse is incurring more debt after we have separated?

If one spouse is continuing to incur matrimonial debt in their own name after a separation, in most circumstances, both parties will still be jointly responsible for this debt.

There is a limited amount that you can do to protect yourself in this situation, save for taking legal advice and seeking to progress any divorce as soon as possible. If debts are being incurred on credit cards, then it would be prudent to consider whether it is possible to place restrictions on the card to stop further spending and to make sure that you have clear and accurate records of any debt incurred after separation.

What can the Court order?

The Court has no power to order anyone to pay a debt or to transfer a debt from one spouse to another. The Court can order one spouse to make periodical payments to the other spouse in order for a debt to be paid, but its powers are very limited in this area and the responsibility for debts may need to be accounted for via the Court’s other powers of re-distribution.