What happens to debt when you get divorced?
Divorce can be a difficult time. In addition to ending a marriage, you’ll have to deal with the practicalities, like sorting out finance. It’s important to know if you’ve got debt that it doesn’t go away when a marriage ends. You may still be liable for it.
How is debt divided during a divorce?
If you’re getting a divorce with debt on the books, you’ll have to look at who’s legally responsible for it. The person who signed the credit agreement is typically accountable. So, if you signed for it, you’re responsible. However, if you and your former spouse took out a joint credit arrangement, you’re both responsible for any debt that may arise.
Courts may also divide up debts when calculating how to award assets to both you and your ex-partner. They typically look at whether the debt was incurred during the marriage, and if it was to pay for something that would benefit both partners, or just one.
Paying off debts together after a divorce
When you take out a joint credit agreement – for example, a mortgage or joint credit card account – then a link is created between the two of you, called a financial association. If you and your ex-partner are financially linked, lenders may look at their credit history as well as yours if you apply for new credit on your own. Their borrowing history could affect yours, and vice versa, unless you get the financial association removed from your credit report. Find out more about divorce and your credit score here.
If you’ve got joint debt, this could mean that one or both of you might have trouble getting new credit, so it’s important that you try to pay off anything you owe, if possible. Here are some ideas for how you could tackle divorce debt with your ex-spouse.
- Agree on how and when you both make payments on joint debt.
- If the payment is transferred from one of your accounts to the lender, the other person could set up a standing order.
- Maintain communication, and be willing to listen if your ex-spouse is struggling financially.
- Agree on how to shut down a joint account – for example, you’ll both have to sign something, rather than one person giving permission.
What to do if your ex-partner won’t pay their debts after a divorce
Circumstances change. Even if your divorce is amicable, you may find yourself with an ex-partner who can’t or won’t pay their share of any joint debts later on. If so, here’s what you might want to do:
- Contact the bank or building society to ask for advice
- Reach an agreement so that they accept lower payments if you can’t make the full payments alone.
- Put some restrictions on the account so that your ex-partner can’t rack up further debts.
Prioritising divorce debt
When prioritising debt from divorce, it may be worth working through step by step all the debts that you may have, and categorising them according to how much they affect your quality of life. For example, you’ll want to make sure that your mortgage is paid, so that you don’t lose your home. You’ll also want to make sure that your utilities bills are paid, so that you can continue to gain access to gas, electricity, etc. Find out more about priority debts from the Money Advice Service.
Protecting your finances during a divorce
Divorce can be a tough time, and relations between you and your ex-spouse could potentially be strained. If you’re splitting up with debts, you’ll likely want to protect your finances. Below are some points to consider.
- Protect the rights to your home.
- Contact your mortgage provider or landlord.
- Contact your bank and other lenders to put an immediate freeze on spending.
- Find out how to get a financial link removed on your credit report.
It’s important to have a plan in place to tackle debt during and after divorce, so that you’re not stuck with unmanageable debt or unable to obtain new credit. If you’re having problems, you may want to get impartial advice from organisations like the Money Advice Service or StepChange.
- Debt consolidation for secured and unsecured loans
- What is a Debt Management Plan (DMP) and will it help me pay my debts?
- Debt consolidation loans for bad credit
- Infographic: Is the UK’s household debt out of control?
- Marriage and bad debt
- How to get out of debt
- What is the IVA register?
- How does debt consolidation work?
- The bankruptcy register explained
- The CCJ register explained
- Hiding debts from your partner
- What is the insolvency register?
- Debt Relief Orders explained
- Good Debt vs Bad Debt: What's the Difference?
- How do IVAs work?
- How Bankruptcy Affects Your Credit Score
- Understanding CCJs