People in debt can get divorced, but will need to agree a plan or make a formal financial settlement to pay off what they owe.

How this responsibility is shared will depend on whether debts run up during marriage are matrimonial – meaning they benefit the couple or a family as a whole – or individual.

‘When divorce becomes inevitable the starting point is to assess all assets and debt, held both jointly and individually,’ says Rosalind Fitzgerald, a partner at Rayden Solicitors.

We explain how this works below, including how to know which type of debt falls into each category, and give tips on protecting your assets and your credit rating.

Divorce decisions: Sharing responsibility for debts depends on whether they are considered individual or matrimonial

Divorce decisions: Sharing responsibility for debts depends on whether they are considered individual or matrimonial

Divorces have fallen to the lowest level in decades, according to the latest official figures, although some experts have suggested the increase in the cost of living could be a factor in couples staying together.

Recent research found one in five divorces could be delayed for financial reasons, including income concerns, financial pressures and the cost of going through a divorce itself.

Average household debt including mortgages was £65,395 last December, according to a separate study by The Money Charity.

Meanwhile, there has been a 50 per cent jump in the value of mortgage arrears over the past year, the latest figures from the Bank of England reveal.

How do DIY divorces work? 

‘No fault’ divorce legislation introduced in spring 2022 has made splitting up simpler and speedier, but critics say the new emphasis on haste means many ex-spouses could be left worse off as a result.

Couples can now get divorced within six months of first applying even if one partner is opposed, and the process is largely online – including the serving of divorce papers by email.

But financial settlements, covering both debts and assets like the family home and pensions, are still dealt with in a separate and parallel process. 

That can continue after the divorce is final, but lawyers advise against this – the pitfalls are explained below.

How is debt divided during a divorce?

The two types of debt accumulated during marriage which are considered during a financial settlement are as follows.

– Matrimonial debt: This refers to assets that have been acquired and utilised to benefit either the couple or the family, irrespective of the name under which the debt is registered, says Fitzgerald.

‘If it was taken for the mutual benefit of you, your spouse, and any children, such as a renovation of the family home, both you and your spouse are likely to share responsibility for the debt.

‘The starting point is likely to be that this is a shared responsibility, and may well be paid from joint assets. However, your individual circumstances, resources and financial needs – including the needs of any children of the marriage – may alter the position.’

– Individual debt: This occurs when one spouse incurs financial obligations for their exclusive needs, says Fitzgerald.

‘Any debt which was originally brought into the marriage by one spouse will also fall under this category, and the responsibility for that debt will usually stay with the same individual.’

Citizens Advice suggests making a list of the things you and your ex-partner own, including personal belongings, cars, money in bank accounts, savings and investments, plus any debts you have, like a bank overdraft, credit card debts or hire purchase agreements.

‘If your debts are shared, you’ll both be responsible for the whole amount – not just your half. This means if your ex-partner stops paying the debt off after you separate, you’ll have to settle the debt by yourself.

‘Even if you and your ex-partner are talking to each other, it’s a good idea to make sure you have a plan for paying off your shared debts. If you’re worried your ex-partner can’t or won’t pay, you should talk to a solicitor.’

What about a mortgage?

Couples are still jointly and individually liable for a mortgage after the separate, according to law firm Rayden.

Lenders will expect repayments regardless of who they are from, although the mortgage could be discharged if the property involved is sold, it explains.

Citizens Advice has information on what to do with a shared home in a relationship split, including continuing to make repayments, buying out an ex-partner and selling up.

‘What you do with your home depends on what you can both afford to do once you’re living separately, how much value (equity) there is in the home and whether you have any children,’ it says.

> My partner and I are separating: Can one of us keep our joint mortgage in the split?

Does divorce affect your credit rating?

‘Getting divorced in itself will not directly impact your credit rating,’ says Rosalind Fitzgerald of Rayden. ‘However, your credit ratings will affect each other if you have joint debts.’

She warns that the law will assume that the majority of financial decisions were made on a joint basis during a marriage, from having both names on utility bills, to taking out joint loans, or getting a mortgage.

The debt charity StepChange says if you have joint debts with your partner you will need to repay the full amount yourself if your partner cannot pay.

Tips on divorce and debt 

Debt charity Stepchange has help and advice here. It says:

– If you are renting tell the landlord your agreement must be put in your name only;

– If you have a mortgage get legal advice to help you decide what to do with the property;

– Tell the local council if your partner has moved out and you are now the only adult in the property – you are entitled to a 25 per cent discount on your council tax;

– Your benefits entitlement may change so find out what you can claim.

> Contact StepChange for help

However, on debts which are not joint you can get a ‘notice of disassociation’.

‘This takes any financial link with your ex-partner off your credit file. Contact one of the credit reference agencies to remove this link,’ it says.

How do you protect your assets during a divorce?

Along with all assets and debts, both your and your spouse’s income, earning capacity and future income needs are assessed during a divorce, says Fitzgerald.

With this information, a solicitor can advise what potential settlement options may be available, and any possible maintenance claims.

‘Your specialist family law solicitor may also work alongside an independent financial adviser or tax adviser in order to best protect your position,’ she adds.

See the box below for how to find a divorce lawyer, and how to get help if you can’t afford legal advice.

Although you can get a ‘DIY divorce’ regardless of whether there is debt or not, Rayden advises not making it final until a financial settlement has been approved by the court.

‘The main reason for this is assets which may benefit a party whilst still married, such as pensions, would be lost if the marriage has ended,’ she says. 

‘For example, if one party dies after the marriage has ended but before the financial settlement has been approved by the court, the other party loses their status as a widow or widower. In the context of debt, one party may be solely liable for the debt following the death of the other party.’

Getting legal help in a divorce 

It is usually best to find a lawyer via a personal recommendation. You can also use the search tool on the Law Society’s website – choose family and relationships in the drop-down box and input your location.

If you can’t afford a lawyer, you can get help with legal fees in certain situations when you separate from a partner.

Details about the rules and a database of solicitors who might be able to help are on the Citizens Advice website.

Citizens Advice also offers suggestions on how to find low-cost or free – called ‘pro bono’ – legal advice. Your local branch can give you free, confidential, independent help on how to move forward.

Citizens Advice says that if you want to represent yourself, you can get advice on going to court without the help of a lawyer from Advicenow.

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This post first appeared on Dailymail.co.uk

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