Dealing With Debt After Divorce: Does it Still Apply?

Find out who is responsible for paying off joint debts after you split up…

It’s normal for partners to apply for a joint loan when they’re a happily “married” couple.  It could be a joint mortgage for their dream home or a joint loan for a car that they had always wished to own and drive.

It’s a mutual investment that they make for their better, more prosperous future.

Until one day it all ends…

Rather unexpectedly, yet expectedly.

A due adieu!

With a heavy heart, but knowing it’s a better decision for both of them, they decide to part their ways.

They divorce!

And with that, all the dreams that they had once shared – end.

But not the loans and the debts.

Those joint loans, they still stand and they transition with them into their new lives.

Joint debts

When you take out a joint loan with your partner, you’re ‘jointly and severally’ liable. What this means is, you and your partner are both responsible for paying 100% of the debt.

Whether you do that on your own, or your partner assumes the full responsibility, or the two of you decide to share the payments – the bank has no concern with that. It just wants its loan to be repaid.

And since this agreement is signed when you and your partner are still in a legal relationship, its obligations are carried forward even when the two of you separate.

So even after divorce, you both are liable to pay off the loan that you jointly acquired.

If you don’t pay the loan assuming that your ex spouse will pay it off (following a mutual understanding), and if for any reason your ex spouse fails to do so, it affects both of you

Your credit score takes a hit and the debt just keeps piling on in your name. You may not get a loan when you apply for one, and at worst, the bank may file a lawsuit against you to get back the money that they paid to you in loan.

What can you do about it?

There are several strategies that you can employ.

First and the most obvious one is that you try to make an arrangement with your ex partner.

If your partner won’t cooperate, you can try to refinance the existing loan with another loan. However, for that, you need to have a good credit score.

The third and the least effective strategy is that you request the bank to remove your name from the loan or shift a part of liability under your name. Banks rarely agree to such an arrangement but there’s no harm in trying it out.

You can consult a UK family law solicitor to provide you a more tailored guidance in your case and help you get debt free post divorce.

A BONUS read: How to Settle Finances After a Divorce?