How to deal with debt in a divorce: What are you still on the hook for after a marriage ends

People in debt can get divorced, but they will have to agree on a plan or reach a formal financial agreement to pay what they owe.

The distribution of this responsibility will depend on whether the debts incurred during the marriage are marital – that is, they benefit the couple or the family as a whole – or individual.

“When divorce becomes inevitable, the starting point is to assess all assets and debts, both jointly and individually,” says Rosalind Fitzgerald, partner at Rayden Solicitors.

Below we explain how this works, including how to know what type of debt falls into each category, and provide tips to protect your assets and your credit rating.

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

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

The 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 rise in the value of mortgage arrears over the past year, latest figures from the Bank of England reveal.

How is debt divided during a divorce?

The two types of debt accumulated during the marriage that are considered during a financial agreement are as follows.

– Marital debt: This refers to assets that have been acquired and used to benefit the partner or family, regardless of the name under which the debt is registered, Fitzgerald says.

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

‘The starting point is probably that this is a shared responsibility and could well be paid for with common assets. However, your individual circumstances, resources and financial needs – including the needs of the marriage’s children – may alter the situation.’

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

“Any debt that was originally brought into the marriage by one spouse will also fall into this category, and responsibility for that debt will typically fall to the same person.”

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 debt you have, such as a bank overdraft, credit card debt or agreements installment purchase. .

‘If you share your debts, you will both be responsible for the full amount, not just half. This means that if your ex-partner stops paying the debt after you separate, you will have to pay off the debt yourself.

‘Even if you and your ex are talking, it’s a good idea to make sure you have a plan to pay off shared debts. If you are concerned that your ex-partner is unable or unwilling to pay, you should speak to a lawyer.

What about a mortgage?

Couples remain jointly and individually responsible for a mortgage after separation, according to law firm Rayden.

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

Citizens Advice has information on what to do with a shared home in a divided relationship, including continuing to make payments, buying out a former partner and selling it.

“What you do with your house depends on what you can both afford to do once you live apart, the value (equity) of the house, and whether you have children,” he says.

> My partner and I separated: Can one of us Keep our joint mortgage in the division?

Does divorce affect your credit rating?

“Getting divorced alone won’t directly affect your credit score,” says Rayden’s Rosalind Fitzgerald. “However, your credit ratings will affect each other if you have joint debts.”

It warns that the law will assume that most financial decisions were made jointly during the marriage, from having both names on utility bills to applying for joint loans or getting a mortgage.

Debt charity StepChange says that if you have joint debts with your partner, you will need to pay the full amount yourself if your partner cannot pay.

However, in the case of debts that are not joint, a ‘disconnection notice’ can be obtained.

‘This removes any financial ties to your ex-partner from your credit file. Please contact one of the credit reference agencies to remove this link,” she 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 evaluated during a divorce, Fitzgerald says.

With this information, an attorney can advise you on what potential settlement options may be available and any potential maintenance claims.

“Your family law attorney can also work alongside a financial advisor or independent tax advisor to better protect your situation,” he adds.

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

Although you can get a ‘do-it-yourself divorce’ regardless of whether there is debt or not, Rayden advises not making it final until the court has approved a financial agreement.

“The main reason for this is that assets that may benefit one party while still married, such as pensions, would be lost if the marriage had ended,” he says.

‘For example, if one party dies after the marriage has ended but before the court has approved the financial settlement, the other party loses his or her status as a widow or widower. In the case of debt, one of the parties may be solely responsible for the debt after the death of the other party.”