Relationship breakdown: debt
This Net Lawman article is one in a series about divorce. It will be useful reading to all those who experience the effects of divorce – the divorcees, older children, family and so on.
Many people find themselves in debt they have difficulty repaying debts. Your circumstances might have changed, for example, you might have lost your job or had unexpected essential expenses. For some people a relatively small rise in interest rates can make it impossible to meet all their repayments.
Whether you are married or living together - money problems can be a big factor in the breakdown of relationships. As the old saying goes: 'When poverty knocks on the door, love flies out of the window.' Even where the relationship has broken down for many other reasons, debt can be desperately worrying when thinking about separating: it is invariably more expensive having two households than one.
What you can do
The first thing to do is to draw up a budget - list all your income, your outgoings (including repayments), your (major) possessions and all your debts. What is the shortfall in your income? Is there anything you could sell to pay off a debt or part of a debt and so reducing your repayments? Are you able to cut costs anywhere?
If you cannot 'balance your books' in this way, there is a lot of help available - free. Your local citizen's advice bureau will be able to give you advice on all aspects of debt and suggest other agencies that might be able to help. If your debts amount to more than £20,000, http://www.clearstart.org is also a good site to visit for information and help.
If you cannot pay your mortgage or rent, it's vitally important that you tell your lender/landlord as soon as possible, explaining why and what you are trying to do about it (even if, at this stage, it's only getting advice). Otherwise they might start legal proceedings against you and you could lose your home.
Are you responsible for your partner's debts?
No. Being married or living together doesn't mean that you are responsible for your partner's debts. You are, however, jointly responsible for any joint debts. Example of joint debts can be:
- Joint mortgages;
- Joint bank accounts;
- Joint loans;
- Joint credit or store cards.
They will be in both of your names and you will both have signed some form of agreement.
Many credit and store cards offer a 'second card' - this does not make the account a 'joint' one. The main card holder is the only one legally responsible for the debt - even if his/her partner is the only person ever using the account.
If you are divorcing, it is possible that most or even all of your debts are regarded as 'family debts'. Our article on ‘finances and divorce’ (links at the end of this one) explains the principles of how the courts make their decisions. Our family law expert is always happy to help.
How to stop your partner creating more debt
You may have realised that you will have to take steps to reduce spending but your partner may disagree. In some cases, excessive spending can be a kind of 'revenge' for the breakdown of the relationship or an attempt to feel better.
If you have joint accounts, you can ask your bank to 'freeze' the account. This means that neither of you can use this account in future. A joint credit card can be cancelled. You are still responsible for the repayments of the amount owing, of course. Second cards on accounts in your name can also be cancelled. That way you can continue to use your card.
You need to make sure, of course, that the family has enough money to live on and pay essential expenses. Making a budget can help you to work out how much that is and you can then both decide who is responsible for how much of it. Opening two separate bank accounts can be a good idea - if you are splitting up, this will happen sooner or later anyway.
If you are not the main earner in the family and your partner is creating more debt, squandering family assets, or is refusing to support the family financially, you might need to make an application to the court.
Click to buy: Separation Agreement
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