I want to divorce my partner but we are in debt, what should I do?

The decision for married couples to divorce is never an easy one and it can be compounded and more difficult to deal with if you or your partner or both of you, are burdened with debt. 

Yasar Khan, a family law solicitor based at WHN’s Blackburn office, outlines how to determine the type of debt that may be involved, who is responsible for it, and how it is then dealt with through the courts.

Is the debt in joint names or in your partner’s sole name?

If the debt is in joint names, both parties are responsible to pay the debt. If parties are divorcing, it is likely that both parties will share the debts as during the marriage they were entitled to share assets and monies available.

If the debt is the responsibility of the sole party, then the parties need to consider the following:

• When was the debt obtained? Were the parties married at the time of the debt?
• What was the purpose of the borrowed money or loans? What was the reason that the sole party obtained this debt?
• What was the monies used for? Was it used for personal or family expenses or the matrimonial home?
• Did the other party benefit from this debt? Or were these monies used solely by the party who is responsible for the debt?
• Who has made payments to the creditor? Has there been payments from both parties or just the named person?

Is the debt pre-marital or marital?

If the debt was incurred prior to the marriage, it is important to determine if the parties lived together as cohabitees but were not married when the debt was incurred. Any debt obtained by a party in their sole name would be classed as their own. This is why it is very important to establish when the debt was incurred, and whether if it was before or after the parties married.

If the parties were married at the time the debt was incurred – it is deemed a matrimonial debt. As with joint assets, the starting point is that all assets or debts are to be shared between the parties upon divorce. Both debts in sole names and in joint names would fall into matrimonial debt.

Once the above has been established, parties should try to negotiate by either attending mediation or instructing solicitors so that the true value of the matrimonial pot can be established, taking into account any debts.

Court process and Section 25 factors that the court needs to consider

If the parties are unable to reach a settlement about the debt, then either party can make an application to the court to seek assistance in obtaining a financial remedy order.

The court will consider the Section 25 factors contained in the Matrimonial Causes Act 1973, which are as follows:

1. Income, earning capacity, property, and other financial resources which each of the party to the marriage has or is likely to have in the foreseeable future
2. The financial needs, obligations, and responsibilities which each party to the marriage has or is likely to have in the foreseeable future
3. The standard of living enjoyed by the family before the breakdown of the marriage
4. The age of each of the party to the marriage and the duration of the marriage
5. Any physical or mental disability of either of the parties
6. The contributions which each party has made or is likely foreseeable future to make to the welfare of the family
7. The conduct of each of the parties.

In cases, where there are young children in the family, the courts main concern will always be the welfare of any minor and how their needs are to be met.

Courts powers and orders that can be made

Several examples as to how the courts may settle the problem of debt are outlined below:

• The debts are to be split between the parties equally or unequally depending on the above factors.
• One party should take sole responsibility of the debt and release the other from any liability.
• Debt should be paid from the proceeds of sale of an asset or the former matrimonial home and the proceeds should be divided equally or unequally again, depending on the above factors.

Yasar manages a varied case load dealing with divorce, cohabitation matters, Children Act proceedings and injunctions. He advises clients across a wide range of private and family law and specialises in high net worth finance matters that include businesses and overseas assets.

If you are considering divorce and concerned about financial debt, please contact Yasar on 01254 272649 or by email: [email protected]