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Going through divorce isn’t easy. Along with all the emotional stress, you’ll have to deal with splitting up your assets in a reasonable manner and arranging how your debts are divided up, which is easier said than done. However, if you know what you are liable for, it could make the whole process that little bit more straightforward.
Who is responsible for the debt after a divorce?
When getting a divorce, you will need to organise your debts based on who took them out and signed for them. You may have borrowed money alone or you may have done this in joint names with your partner, either way, you need to decide who is responsible for what.
During a marriage, any debts taken out jointly will be in both of your names and will need to be paid back by both of you. If you have signed for a credit agreement in your name only, you will be responsible for that debt and your partner will not be liable for paying the debt.
When you get divorced, the court could order that one partner pay off the other partner’s debt. This could happen for a number of reasons, for example if one partner requires additional financial support.
If you hold a joint bank account with your ex-partner, you will both be responsible for the credit or debt that account holds. You may find that one of you has spent more than the other (maybe without the other’s permission) but you’ll both be equally liable for any debt in the eyes of your creditors.
What are your priority debts?
If you are struggling with multiple debts, your priority debts should take precedence. These include your mortgage and utility bills, as failing to pay these in full and on time could result in the loss of your home and basic everyday essentials, like gas and electricity.
If you have other debts that you cannot afford to repay, you should attempt to make token payments to these creditors to show you are making an effort. However, you should contact your creditors and explain your situation to see if you can be offered a payment break or reduced monthly payments. Some lenders may even freeze interest and fees, but this isn’t guaranteed.
What are the consequences of not paying off joint debts?
If you do not pay back your debts in full and on time as per your agreement with the creditor, it is likely you will be chased for the money. Your lender will contact you and ask for an explanation as to why your payments are late.
You may also find that your creditors impose charges and fees onto your debts. This shouldn’t come as a shock, as your contractual agreement should have been made clear to you when taking out the debt.
You should not stop making payments outright, without first obtaining debt advice. Not only will you usually incur late fees, you may find it difficult to get credit in the future. If you are refusing to pay debts in joint names, you should think about how this could affect you and your partner’s credit ratings and financial standing; you may be forced into bankruptcy, if a lender decided to pursue this route.
Try your best to compromise
If you are in the process of separating or have just done so, managing debt may be pushed towards the back of your mind. However, you should be prepared to arrange your debts to try and make the separation as easy as possible.
If you and your ex-partner cannot come to an agreement, you will have to talk it over and decide who is responsible for what. You may wish to compromise and decide on sharing out the debts, so each of you takes responsibility for paying off certain creditors.
What do you do if your partner doesn’t cooperate?
If you find that your ex-partner is refusing to pay back what they owe, you can approach your lender for advice. Although this isn’t guaranteed, you may find that lower repayments can be made towards your debt, spread over a longer period of time. You may also be able to put restrictions on your joint account to prevent more money leaving it. It’s wise to act to make sure you protect your credit rating as best you can.
If you feel your bank or lender isn’t dealing with your case fairly, you can appeal to the Financial Ombudsman Service and explain your situation to them. Although they won’t be able to arrange your debts, they can work with your lender to make sure they are behaving in the correct manner.
Get debt help and advice
You don’t need to worry about debt alone. Find out more about debt and receive free, professional advice from PayPlan at PayPlan.com
Our advisers are here to help and they will be happy to talk to you about your financial situation. Get in touch today by calling our freephone number: 0800 280 2816.