When people separate and divorce, their two primary concerns centre around children and finances. Dealing with debt can be stressful at any time, but if you are going through a break-up, the problems can be magnified. There are many misconceptions about who is responsible for a spouse’s credit card debt. Read on to find out how your partner’s debt can affect you and the actions you can take.
When people separate and divorce, their two primary concerns centre around children and finances. Dealing with debt can be stressful at any time, but if you are going through a break-up, the problems can be magnified. There are many misconceptions about who is responsible for a spouse’s credit card debt. Read on to find out how your partner’s debt can affect you and the actions you can take.
If you have need help with your divorce and you feel you need legal advice, contact specialist family solicitor Mark Heptinstall of Slater Heelis Solicitors. He is recognised as a ‘Leading Individual’ in The Legal 500 and ranked in Chambers UK, and is described as having “the amazing ability to bring calm into troubled waters”.
Am I liable for my spouse’s credit card debt if we divorce?
Despite widespread beliefs, there is no such thing as a joint credit card. But if you allow someone to hold an additional card on your credit card account, then you remain solely responsible for how the account is run, and because of this, it will not show up on your spouse’s credit file.
Being married to someone does not automatically make you responsible for debts in their sole name, and if you don’t have joint finances, such as a mortgage or joint bank account, then you can’t be made to pay them direct. However, this does not mean you will be off the hook entirely, particularly if the debt has been run up for the benefit of the family. Even if you knew nothing about it.
Fundamentally, if you want to be released from full responsibility for a debt, you will need to show what the debt refers to, and that it was not run up for the benefit of the family. For example, if your spouse has run up credit card debts on gambling, then you may be able to argue this is non-matrimonial. On the other hand, if the card was used to buy items that benefitted the children, such as on school uniform or clothing, these are much more likely to be considered matrimonial.
Can I be held liable for my spouse’s debts?
The starting point is equality, and it is up to you to show that a debt is not a joint responsibility.
If you separate from your spouse, you are both responsible for any joint debts. This doesn’t mean you owe half the money, because a lender can demand the full amount from you if they cannot get it from your ex. This can still be the case if one person withdraws a large sum of money or runs up huge joint debts without the other’s knowledge.
If your spouse has run up debts on a joint account which they cannot repay, then you are also legally liable. Accepting responsibility for someone else’s profligacy can be difficult, but leaving things is likely to have a detrimental effect on your own credit rating. If you don’t have the means to pay off the debt immediately, the following options may help:
- Entering into a debt management plan (DMP) – this is an agreement made between you and your creditors if you are struggling to make payments
- An individual voluntary arrangement (IVA) – this is a binding agreement between you and your creditors to repay an agreed proportion of the debt over a period of time
- Bankruptcy – this tends to be considered by most people as a last resort, and is a legal status with many implications for property and any assets owned.
Can I transfer debt to another person?
There are only certain situations that allow debt to be transferred to another person. For example, some credit card providers will let you transfer balances from one person to another. However, the request must come from the individual who will be taking on the debt.
What about credit card debts run up after separation?
If your ex continues to rack up debts after separation, but before you have reached a financial settlement, then the rule of equality continues to apply. If it can continue to be demonstrated that the debt is for the benefit of the family, then it is likely to be included as a matrimonial liability.
Conversely, if your ex runs up a debt that only they benefit from, then it is likely the court would disregard it and your spouse will be required to take full responsibility. For example, if your ex took several holidays overseas and put all expenses on their credit card.
How does the court move away from equality?
Equality is the starting point, but it is not always how finances end being divided on divorce. Several factors are considered by the court, such as needs, contributions, and earning capacity, which can mean that a debt may not be shared equally if there are other reasons for a different division.
In reality, it is unlikely that individual debts will be split, and the court does not have the power to transfer debts from one person to another, either. The way they would be factored into a financial settlement would be part of the decision as to how the matrimonial pot is distributed.
If one spouse has a debt in their sole name that is considered matrimonial in nature, then the spouse whose name the debt is in will receive a greater share of the matrimonial assets to account for the debt they have and continue to pay.
How can I protect my finances during a divorce?
It is important to have a plan in place to tackle any debt that has built up during the marriage or divorce so that you are not lumbered with debt or unable to obtain credit. When you are separating, you will probably want to protect your finances as much as possible. Below are some points you should consider:
- Protect the rights to your home, if necessary. If your home is owned in one person’s sole name, you can register your interest to make sure it can’t be sold or re-mortgaged without your knowledge.
- Contact your mortgage provider or landlord
- Contact your bank and any other lenders to put a freeze on spending
- Take a look at your credit report and find out how to get a financial link removed on your credit file if necessary
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