5 steps to a debt free divorce

When you are going through a divorce, it is easy to focus on assets such as the family home and forget about how you are going to deal with loans, credit card balances and other outstanding debts. You or your ex may even owe money that the other doesn’t know about.

The most important piece of advice we can give you is to be up front about your situation right from the start. We will help you tackle any debts that you or your ex may have during the divorce process so that you can move forward without any money worries hanging over you.

Here are our 5 tried and tested steps for a debt free divorce: 

Set priorities

The debts you should pay first are those related to your home. These include mortgage or rent arrears, council tax and utility bills. If you don’t, you could risk losing your home or being taken to court. When you have worked out how much you owe on these, you then know what money is left to go towards loans, credit cards, hire purchase arrangements and other liabilities.

Don’t bury your head in the sand

Failing to tackle debt can affect your credit rating, making it harder to move on with your life. If you have any joint credit agreements, such as a mortgage or joint credit card, you have a financial association with your ex and a lender may look at your ex’s credit history as well as yours when making future lending decisions. This can make it harder to apply for credit in your own name.

Agree how to repay the debt

Legally, debt is the responsibility of the person who signed the credit agreement. However, when you are married things are rarely black and white and individual debt may have been incurred on behalf of the family, for example a car loan or a credit card bill that covers last year’s summer holiday. If your ex is refusing to pay their share of a joint debt such as an overdraft or mortgage, we can help you negotiate with your bank or building society. It might be possible to put a restriction on the account so that further debts can’t be racked up or to agree lower payments until the amount is fully repaid. We can also advise you on resolving other joint or solely held debts when conflict arises to help you reach an amicable solution and a sensible payment schedule with your ex and lender.

Keep talking

The ideal outcome of any divorce is to reach a financial agreement which is fair to both sides. Try to be realistic about your own objectives and take into consideration any financial struggles your ex might be facing. Good communication is key here. We will work with you to agree payment schedules with your ex to make sure that any debts are tackled before you finalise your divorce or, if this is not possible, that a plan is set out as part of your financial settlement. It is important to have a formal agreement covering any ongoing joint debt management programme so that both sides are legally obliged to stick to the terms.

Make sure you have clarity

The only way to be absolutely certain you are avoiding financial liabilities or credit rating risks after your divorce is to make sure you have the full picture. Both parties have a duty to provide a full, frank and accurate disclosure of their financial circumstances as part of the divorce process but how can you be sure that the information your ex has given is accurate? Furthermore, is it fair? Fairness is an important factor when it comes to having a debt free divorce and we will encourage you to be very open with us about your needs. This includes considering your future earning capacity, the standard of living you and your family have enjoyed to this point and any special circumstances that need to be taken into account, such as physical or mental disability in respect of either party or your children. We will look at non-financial contributions that have made to the family such as staying at home to bring up children, making sure this is taken into consideration.

It is our job to make sure your ex has been truthful, to help you work out how much money you need to live comfortably and debt free in the future and to negotiate a financial settlement that is fair for the whole family and does not leave you disadvantaged.

If you want to know more about achieving a debt free divorce, pick up the phone and talk to us on 01423 594680.

Emma Doughty is family lawyer who provides straightforward, easy to understand advice.  She is passionate about helping people and using her expertise to achieve the best outcome possible.  She has been described by her clients as “tremendous and incredibly supportive”.

Everyone’s circumstances are different and this article is provided by way of general information only and must not be relied upon.  If you require legal advice on a family law issue, please feel free to contact us by emailing enquiries@harrogatefamilylaw.co.uk.