Throughout our lives there are many challenges and cross roads to face, and unfortunately for some, one of those cross roads is divorce. No one enters into a marriage with the idea of getting a divorce. If it happens the stress and heart ache can mean your financial concerns take a back seat.
Whether we want to accept it or not, marriage is a business transaction. It includes assets, like houses and cars, shared expenses, superannuations, bills, and estates, just to name a few. If you have children it also means shared financial responsibility for many years to come. Most marriage breakdowns are not immune to debt responsibilities either. Within debt contracts it is made clear that joint debts require both parties to be equally responsible for the WHOLE amount of the debt owed. Not half each, not even: “I’ve paid this much and they’ve paid some.” To the financial institution the full amount is the responsibility of both parties.
Creditors are under no obligation to spit up joint credit accounts and even if you arrange a new loan to pay off your share, your name will still be attached to the former credit, along with it, the responsibility if it’s not paid. Fortunately there are options you can work through. If you are in an amicable split you can go through these together otherwise you may need to communicate via a mediator or solicitor.
The first piece of advice we need to give you or someone you know when you are facing divorce DO NOT ignore the debt no matter how unfair you feel it is. The best thing to do is educate yourself about debts and specifically about the debts you have. Get all your bills, credit card statements, home and personal loan accounts and whatever else you have financially and figure out exactly what you and your spouse owe. Get financial counselling to seek the best advice to move forward. The rest of your current situation might be very emotional and rocky but in this financial area you need to remain level headed. It might be worth getting personal counselling to help you talk through the emotions of dealing with financial matters so you can save the stressful feelings for the counselling room and have yourself together for the hard negotiations.
Some things you might want to think about as soon as possible include:
- Splitting all joint accounts and removing each other as authorised users on the accounts;
- Look at your options for freezing the account for a portion of time;
- Agree on how to split your loans and renegotiate new separate loans.
Tips for moving forward:
- If your credit cards are in both names but you use separate cards organise paper work to have each others name removed from the others account. If you have to work out if purchases were for combined family purchases, work through your statements to account for all the purchases from each card to find the difference. Make sure you keep all paperwork.
- Look at ways of using marital assets to jointly pay off what you owe so you can make a fresh start. It is best to get independent advice on this particularly if emotions are running high.
- If you establish credit in your own name, after separating the liabilities from your spouses ensure you watch your credit rating and regularly check your credit file. You may have some work to do on your credit file but a good first step is to create a budget to pay off any remaining debt and increase your savings.
- Update your Will, reorganise your insurances and address your superannuation.
- Talk to your creditors as soon as possible. Let them know your situation and advise that you’ll be making changes to the loan and possibly refinancing. It is very important that despite any disputes that are outstanding with your partner, if you are jointly responsible for the debt then whatever you do make sure that some payment is made towards all loans. Even if it is very small. If the disagreements look like lasting a while then make sure that you negotiate a payment arrangement with your creditors.
- If you are experiencing hardship you can make arrangements with creditor if you apply in the right way.
And finally, become aware of the divorce laws and how your debt will be divided up. Keep a diary of dates of separation, keep all of your paperwork and make sure you are clear about finances after those dates.
If you’re facing financial hardship we are here to talk about a solution. Call us on 1300 887 211 or Book a Free No Obligation Phone Consultation with our friendly team and we can discuss debt management options specially focused on your personal situation.