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Divorce Settlements: How to Divide Up Debt After Separation

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The strong vows during a marriage may make it appear like there is nothing like divorce, but the reality is that a reasonable number of married couples end up divorcing afterwards. Divorce is a hard time given that you have to decide on critical issues such as property, child custody, and not forgetting, your debt. The division of assets during divorce settlement is on each of the partner’s priority, but no one would be willing to share the family ‘was family’ debt. The process can be easier for when the couple agree, but what if no one wants the debt responsibility? Below is a guide on how to deal with different types of debt after separation.

The Mortgage

The largest debt in a family is most likely the mortgage. The mortgage is redeemed from the proceeds of the sale if the couple decides to sell the property. If the amount is not enough, the mortgage company can claim the outstanding balance from one or both partners. The couples are both responsible for the mortgage debt if it is joint and the mortgage company can pursue any of the two.

A couple should agree on whether to transfer the mortgage to the one keeping the home If the property under a joint mortgage is not sold. The reason for this is that the court cannot transfer the house to one of the parties when still in joint names.

Other Registered Charges

Apart from the mortgage, a couple can have additional loans secured against the property. The parties have to confirm the registered details through copies of the register from the land registry. The details help the partner who wants to keep the home in understanding the debt responsibilities that comes with it.

Unsecured Debts

The determinant for who will inherit unsecured debts such as credit cards, bank loans and car finance is not solely on whether they are joint or under a sole name. The couples should agree on how to share the debts since the court cannot transfer the debt order a party to pay the debt. Sometimes the court can make a declaration as to the party responsible for such debt and order the other party to help in the maintenance repayment.

When one Party Files for Bankruptcy

It is important to note that the bankruptcy court does not eliminate the debt but only removes the person’s liability for the debt. The other partner will still be responsible unless they also file for bankruptcy.

Matrimonial Debt

Marital debt is debt incurred for something that the couples both enjoyed during their marriage. Good examples include holiday expenses and purchasing home furniture. The court views such cases as a joint responsibility even when the debt is under a single name. The court can decide to order one party to help the other in servicing the deb, but the best option is always to sell the assets available and raise money to repay all debts from the marriage.

When the Former Spouse Doesn’t Pay

In most case, the creditor will come for the party responsible for the debt even if the court ordered the spouse to help in servicing the debt. A spouse can petition the court to enforce the agreements made during a divorce when in such a scenario.

Parting Words

Divorce is a difficult time for parties undergoing through the process, especially if there is a lack of cooperation. Debt is one of the most complex issues in divorce, given that no most parties would not willingly accept debt from the ending marriage. The best scenario is to sell the assets and clear all debt before or during a divorce. Hiring family lawyers like Sydney divorce lawyers can help you avoid some of the pitfalls in the process.


Patrick Watt is a content writer, writing in several areas, primarily in business growth, value creation, M&A, and finance. Other interests also include content marketing and self-development. Say hi to Patrick on Twitter @patrickwattpat


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