Divorce and debt – who owes what?

Money is very often one of the most contentious issues when couples separate or divorce. Whilst we may struggle to reach agreement on the fair distribution of jointly held savings and investments, debt is also an important issue and shouldn’t be overlooked.

Very often, separation or divorce will mean that one, or both parties may need to refinance and remortgage.

Actions to take

Our list below details what happens to your ability to borrow and what action you can take to avoid being affected by your former partner’s financial history:

• Check your credit report: A financial association is someone you’re linked to through joint finances or a joint credit account.
• You’ll become financially associated with someone if you have a joint bank account or have joint mortgage or loan.
• Marrying doesn’t necessarily tie you to your spouse’s finances. You can marry, enter a civil partnership, move in together, and even take someone’s surname without creating a financial association on your credit report.
• Marriage does not mean your spouses debts become yours. You are not legally responsible for your partner’s debt, unless it’s in your name too.
• Get in touch with a credit reference agency and request to remove your former partner from your credit report. You will then be able to provide proof that your financial connection has ended.
• If you’ve had a break up or divorce, but still share a mortgage with your ex-partner, you may still be able to break the association between you if you’ve been living apart for more than six months. In this case, you’ll need to close all other shared finances with them, such as joint bank accounts.

You should consider making sure that your credit report is up to date and that your credit score is not damaged by a former partner’s behaviour or financial history. Companies view information on your credit report when you apply for credit, such as a mortgage or loan. This gives them an idea of how well you manage your finances, and helps them decide whether to lend you money.

Your financial associates appear on your report, and companies may check their credit history when deciding whether to approve you. This is because your financial associates may affect your ability to repay debt. For example, if your partner’s been made bankrupt, companies may be concerned that you’ll need to help them repay their debts before you can repay your own.

If you would like any further help or advice, please contact our team on 01903 534587.