Who takes the debt in divorce proceedings?

Divorce settlements reported in the press tend to focus on the division of assets with parties often moving on with a few million in the bank.  However, the reality is that for a lot of people trying to reach a financial settlement it can be as much about who takes on the debts as it is about how the assets are divided. Here, Partner of Divorce and Finance, Lisa Brown, discusses the ways in which debt is treated within divorce proceedings, and the factors that are considered when assets are divided.

The starting point

The starting point when it comes to financial settlement on divorce is to look at sharing assets and debt equally, but this is not the end of the story.  There is then a cross check to see whether this meets the needs of the parties and any children.  We must also consider whether it is fair having regard to the factors set out in section 25 Matrimonial Causes Act 1973.  These include the financial circumstances of the parties, their ages, health and the length of the marriage.

What if I didn’t run up the debt?

The nature of the debt can be considered, and, in some circumstances, it might be classed as “non-matrimonial” which would mean that the principle of it being shared equally would not apply.

A lot will depend on the factual matrix including how exactly the debt was accrued.  If, for example, it was incurred by one party buying lavish gifts for somebody they were having an affair with then they might have to meet the entirety of it.  However, if it accrued generally meeting household expenses this is far more unlikely, even if the other person wasn’t aware of it.

With debt brought into the marriage by one party the length of the marriage can also be relevant.  As a general rule, the longer the marriage the more likely it is that there will be equal sharing of debt.

My partner is a spend-a-holic; why should I have to pay?

This scenario often crops up as there is frequently one person who is better at managing money than the other.  It can sometimes even be one of the reasons for the breakdown of the marriage itself.  In the case of G V G (Financial Provision: Equal Division) [2002] EWCA Civ 14 Mr Justice Coleridge discourages judges from “rummaging through the attic” of a marriage and it is a warning which most have heeded- not least because to do so would take up extraordinary amounts of court time.

The reality is therefore that it can be quite difficult to persuade a court to adjust a settlement simply because one person is a bit financially irresponsible.  This can be an easier argument to run if the spending is post-separation.

What about the mortgage?

For most people this will be the biggest debt and there is often debate as to who must pay it if one party moves out and no overall settlement has been reached.

There is no easy answer but if the mortgage repayments on a joint mortgage are not met the provider can pursue either party and it will potentially impact on both credit ratings.  It is therefore important to try and reach an agreement on this.

If you are in a situation where you are left unable to meet the repayments, you can consider applying to the court for an order that the other party pay you a monthly amount until you reach an overall settlement.

Finally

Any liabilities not explicitly dealt with in a divorce settlement will be the responsibility of the person whose name they are in.  It is therefore important to consider whether there may be any forgotten about finances agreements, credit cards or future tax bills before any settlement is finalised.

If you are in a situation where debt has accrued due to the conduct of the other party then it is possible for a settlement to take account of this, but you will need to be prepared to evidence exactly how and when that debt accrued and there needs to be strong, clear reasons to justify why the debt shouldn’t be shared.