Who Pays the Debts After Divorce?

Hannah Goldstein

Am I liable for my husband’s debts if we are separated?

Debt is a significant source of stress for many people.

The average UK household now has debts of around £65,000 according to The Money Charity, and money troubles are one of the most common reasons why couples get divorced.

Once you have decided to go your separate ways, the question becomes one of how much liability you have for the debts that you and your spouse accumulated while together or apart.

The answer is more complicated than you might expect. The main factor will be whether the debt is considered to be joint debt, regardless of when it was incurred and whose name is on the account, or whether it can be shown that the debt was incurred outside the marriage.

Who is responsible for debts?

If you’re getting a divorce or legally separating with debt on the books, you’ll have to look at who is responsible for the debt in question.

Generally, the debt is tied to the person whose name is on the account. So if a credit card is in your name, you have to make the repayments, and the provider can pursue you if they’re not paid.

Where the debt in both names, you are both responsible for the whole debt. Although you might think you would each pay half, most joint loans and mortgages are structured with ‘joint and several’ liability. If one of you doesn’t pay, the other is liable for the full amount.

How are debts divided in a divorce?

Courts will look at how to divide up debts when calculating a fair financial settlement in your divorce.

They typically look at:

• Whether the debt was incurred during the marriage, and
• Whether it paid for something that would benefit both partners, or just one.

These factors are more important than whose name the debt is in. So while, as a general rule, each spouse is responsible for their own individual debts accrued during the marriage, a court might decide that the debt is a joint responsibility.

Matrimonial debt

The key matter is whether the debt is a matrimonial debt. Debts run up for the benefit of the family, for example, to buy furniture or pay for holidays, are likely to be considered a joint responsibility, even if the debt is only in one person’s name.

If you want to be released from responsibility for a debt, you will need to show that it is a non-matrimonial debt. If your spouse has racked up gambling debts that you knew nothing about, or maxed out their store card on designer clothes, then you could argue that you are not liable for the repayment of those debts and they are your spouse’s sole responsibility.

What about debts incurred before the marriage or after we separate?

Debts incurred by your spouse before the marriage may still be considered for the benefit of the family. A good example could be a student loan – even though the debt was incurred before marriage, the education and qualifications gained will have enhanced their earning potential during your relationship.

Debts that are racked up after you have separated, but before the Final Order is made, are more of a grey area. If it can be shown the debt is for the benefit of the family – even though you live apart, one of you might pay for a holiday or school fees, for example – then it is likely to be included in the matrimonial pot.

If your spouse took themselves off on a luxury holiday after you split up, don’t worry – that debt is likely to be considered non-matrimonial.

How will the debts be split?

A solicitor can give you an idea of what a judge might decide if the matter went to court. Each person’s financial situation is different, and the financial settlement will depend on a range of factors, such as how much each person earns and what other assets they have.

Also, it’s important to understand that the debt will not be physically “split.” The court does not have the power to transfer a loan or a debt from one name to the other’s. Instead, the court will consider how debts are factored into overall financial arrangements. For example, if there’s a matrimonial debt for the benefit of the family in your ex’s sole name, then your ex-spouse may receive a greater share of the equity in your family home or another asset to offset that debt.

How can we help?

Financial arrangements always involve some type of trade-off to achieve a fair outcome. A family law solicitor can help you to understand your options when it comes to how debts should be fairly considered as part of your financial settlement. To speak with us about your debt situation or divorce matters generally, contact us by:

• Filling in our online enquiry form; or
• Calling us on 020 7485 8811