In relation to debt, during a divorce it is important 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.
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 and when the debt was accrued.
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, credit card etc), then it is likely that both parties will be jointly responsible for the debt. It will therefore need to be accounted for within any settlement accordingly. These debts are referred to as matrimonial debts. These matrimonial debts would typically include debts incurred to fund building work and improvements to the family home, family holidays or the family car.
Alternatively, if one spouse has accrued a debt and has had the sole benefit of the debt, even if taken out during the marriage, then the court may regard this as a liability which that individual spouse should be responsible for, as part of any financial settlement. In other words that 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, it is a very rare finding to make and often the costs incurred arguing the 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 were accrued before or during a marriage. If one party brought significant debt into 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 or matrimonial debts.
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. Unfortunately, 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.
The family court does have the power to order either party pay a debt or to transfer a debt from one spouse to another. The court can also order one spouse make periodical payments to the other spouse to enable the monthly payments of 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.
If you need guidance on how debt may be treated during your divorce, contact our team today on 0161 696 6193 for clear, reliable advice.
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