When you divorce you will have to decide how to split your property and assets. As part of this process, you will also have to agree on how you split any debt that you might have. This may include your mortgage, or other credit cards or unsecured loans. So, what happens to your mortgage when you divorce? Do you have to split your ex’s debts? How do you divide credit card debt? And what happens if your spouse runs up debt while you’re going through your divorce? Keep reading for answers to these questions and more in your guide to debts and divorce.
Note: in this guide we regularly refer to what the court might typically do or typically decide. However, in many cases, a couple will not go to court and the divorce will instead be negotiated between the spouse’s solicitors. This is much cheaper than going to court. The solicitors will advise on the likely actions of the court in order to help the spouses come to an agreement themselves and to prevent them from reaching a stalemate that only the court can resolve.
Do I have to keep making payments on debts during the divorce?
During your divorce, you should always try and keep up repayments on any loans or debts you have. Failing to keep up these repayments could mean you go into arrears, damage your credit rating and, in a worst-case scenario, you could even lose your home.
If these debts are in joint names, then don’t assume that you can simply pay half of all the repayments. If you have a joint mortgage or unsecured loan, each of you is liable for both the total repayment and the total amount you owe. This is called ‘joint and several liability’.
Even if you’re separate or divorced, you will still have to make payments to debts that you took out in joint names. This includes your mortgage and any loans. (For more information on how you deal with your mortgage when you divorce, see below).
If your spouse doesn’t keep up repayments to a debt, the lender may pursue you for the full amount of the payment even if the debt is in joint names.
If this happens, contact your bank or lender and ask them for their help. They may be able to freeze your account in order that your spouse can’t increase the debt or come to an agreement to accept a lower payment if you can’t afford to pay the full amount.
If you can’t afford to keep paying all of your debts, you should order them in terms of priority. Debts you should pay first include:
- your mortgage or rent payment
- Council Tax
- gas and electricity.
If you don’t pay these, you could face serious consequences including court action or even losing your home.
The one debt you may not be responsible for paying is a ‘joint’ credit card. If you were the second cardholder on a credit card in your spouse’s name, there is no legal requirement for you to contribute towards this. This is because there is technically no such thing as a ‘joint’ credit card account.
What powers does the court have in relation to debt and divorce?
Just as a court may be asked to decide how your assets should be divided when you divorce, they may also have to rule on how debts are split when you separate. And, debts can often prove to be a difficult subject when it comes to creating a financial agreement.
The court may have to deal with the following:
- Debt in your joint names (‘joint debts’)
- Debt that is in one of your names but was actually for the benefit of both of you
- Debts that are in your joint names but was accrued for the benefit of just one of you
- Debts that either of you incur after you have separated.
A court will make a ruling based on the individual circumstances of your case. Note that the court can’t change who is responsible for a debt. For example, they cannot attach a debt to one of you if it is in your spouse’s name. They also can’t transfer a debt from one spouse to another.
In order to decide how to apportion debt, a court will look at which are ‘matrimonial’ debts and which are not (see below).
Do I have to split my spouse’s debts?
Normally, you are responsible for debt that is in your own name.
However, if you can prove that any debt is ‘matrimonial debt’ – in your name but accrued for the benefit of your marriage – then your spouse may be responsible for a part of this debt.
For example, you may have taken a loan out in your name to pay for a holiday that you both went on. Here, the court may consider this is ‘matrimonial’ debt.
The court will typically start from an assumption that any debt accrued during your marriage is ‘matrimonial’ debt. This means that the court can decide that all debt that you accrued during your marriage is ‘matrimonial’ debt even if it was for the benefit of one of you.
If you have acquired debt since you separated, then this will typically remain your responsibility. If your spouse has run up debt since you separated this will generally be regarded as their responsibility. Again, there is no hard and fast rule as debt your spouse has accrued looking for somewhere to live after you separated may be considered ‘reasonable’ by the court.
Remember that if you own joint assets, lenders can take steps to recover any debts that are owed from your ‘joint’ property. So, if your ex has run up credit card debts but you still own your home jointly, the card company may be able to make a claim against your spouse’s share of your property.
What does the court consider ‘joint debts’?
If the credit agreement is in two names, it will be a ‘joint debt’. You and your spouse are ‘joint and severally liable’, meaning that you are both responsible for 100% of the debt and 100% of the repayments.
Joint debts can include:
- A mortgage or other secured loan
- An unsecured loan, such as a car or bank loan
- An overdraft on a joint bank account.
Credit card isn’t generally considered ‘joint debt’ as you can’t have a joint credit card.
If debts were incurred for the benefit of the marriage, then a court could quite possibly consider this ‘joint debt’ even if it is in just one of your names.
What if my spouse creates more debt during the divorce?
As above, if debt is in your spouse’s sole name and increases during the divorce then they will typically be responsible for this debt, as long as the money was used for their sole benefit.
However, remember that if a debt is in your joint names then you are both liable for 100% of the amount owed and 100% of the repayments under the principle of ‘joint and several liability’ (see above).
If your spouse withdraws money from your joint account and goes into your overdraft, you are technically both responsible for this debt. While the lender may pursue you both for this debt to be prepaid, if they can’t find your spouse you may be liable for the full amount.
If you have joint accounts/debts, it can make sense to speak to your bank or lender and explain your situation. They may allow you to ‘freeze’ an account to prevent any further withdrawals or from the debt increasing.
What happens to our mortgage when we divorce?
When you divorce, your largest debt is likely to be the mortgage on your marital home.
If you are planning to sell the property, the mortgage will be repaid from the sale. (The exception is if you are in negative equity – see below).
If you are not going to sell the property, then you will need to decide who is responsible for the mortgage payments.
Your options are:
- Transfer the mortgage into the sole name of the person keeping the property. Your mortgage lender will need to agree this transfer, and they are likely to underwrite your application to ensure the mortgage is affordable to you based on your income and outgoings. You will have to show a lender that you can afford to take on the mortgage in your own name.
- The court can transfer the property in your sole name with the mortgage staying in joint names. This would generally only happen if the person keeping the property agrees to make all the mortgage payments. This party would also need to ensure the other party is not liable for the monthly repayments through a binding agreement such as a Deed of Trust.
Bear in mind that if one of you wants to stay in your home, that person will typically have to consider buying out the other spouse’s share. They will need to raise the funds needed to buy the share and establish whether the mortgage lender is willing to let them take over the mortgage.
If you don’t keep up the mortgage repayments, your lender can try and claim any arrears from all parties named on the mortgage.
If you live in England and Wales, then two further options are a Mesher order or a Martin order.
- Mesher order – here, the court makes an order that prevents the home from being sold for a fixed period of time, normally because your children are living there. This type of order lets one spouse stay in the property until a fixed point (for example, when your children reach the age of 18). The property stays in joint names even if just one of you is living there.
- Martin order – here, the court orders that one spouse is allowed to remain in the property for the rest of their life. The property remains in joint names and the property can only be sold when the party living there dies or decides to move.
What happens to unsecured debt such as credit cards or personal loans?
Debts such as unsecured loans or car loans could be in either your joint names or in single names. You and your spouse may also have credit cards, and you may even be a named second cardholder on some of these cards.
If you can’t agree which of you is responsible for your unsecured debt, the court can decide. It can make a ruling on who is responsible for a certain debt and can help that party pay the debt through the award of a maintenance payment.
However, the court can’t order that a debt is transferred from one spouse to another, and neither can it order a spouse to repay a debt.
If you have joint assets, the court will typically require you to liquidate these assets in order to pay any martial debts.
As mentioned above, courts generally presume that debts that you incurred during your marriage are ‘matrimonial’ debts until you can prove otherwise. This means that joint debts would generally be deducted from the total value of your assets before they are divided.
As credit cards cannot be held jointly, they will normally be the responsibility of the person whose name the card is in.
How do we divide a property in negative equity?
If the value of your home is less than the amount you owe on your mortgage (plus other secured loans) then you will be in negative equity.
If you’re planning to transfer the ownership of the property into one name and you owe more than your home is worth, the spouse who is being bought out will need to make a payment to the mortgage lender to ensure their share of the negative equity is paid off.
If you are planning to sell a property in negative equity, and you don’t have other assets that you can use to pay off the debt, the amount you owe will normally be divided between you both.
For example, if you sell your home for £180,000 and you have an outstanding mortgage of £200,000, you will have to split the debt of £20,000 between you. Your liability for the debt does not end on the sale of the property, and you remain responsible for it even after your home is sold.
Remember that if your mortgage is in joint names then each of you is responsible for the total debt and for paying the mortgage.
Find The Best Divorce & Family Lawyers Near You
We independently review and list the top divorce lawyers and family solicitors in the towns and cities near you. 100% free.
The information on this website is to be considered a guide and is therefore not legal advice. You use this information with the understanding that Wiselaw does not accept liability for any direct or indirect losses as a result of anyone relying on or acting upon the information on this website. Whilst we endeavour to provide accurate information, Wiselaw does not accept liability for any errors or omissions on this website.