Debt and Divorce: How to deal with joint debt after separation
At Lowell, we understand that financial separation can cause a lot of stress when it comes to managing and taking control of your own finances. Sorting out financial responsibility during a separation can be tricky, especially when it's going along with a difficult split or divorce proceedings, and you're also likely figuring out how to manage your finances on a reduced income.
That’s why we’ve created this guide for anyone who’s feeling unsure or concerned about financial responsibility during separation. In this guide, we’ll discuss the financial matters that could be impacted by separation, who is responsible for debt after separation, what joint debt is and how it can impact you, and ways to deal with debt and divorce.
To find out more, carry on reading or click on one of the links below to skip to a particular section:
Who is responsible for debt after separation?
How to deal with debt and divorce
This content is intended to be an impartial guide about debt and divorce, or separation. Lowell Financial Ltd does not offer financial advice. You can find out more about the organisations you can contact in our guide on debt help and support.
Who is responsible for debt after separation?
Generally speaking, the names that are down on the credit agreement are those who are responsible for the debt. For instance, if you have joint debt then both people are equally responsible for paying off any outstanding balance. However, if your ex-partner has debt in their own name alone then this won’t affect you.
We’ll discuss more about what joint debt is, how it works, and how it could impact you and your finances further down in this guide.
Am I responsible for my spouse’s debt?
Just because you’re married, this doesn’t mean that you’re immediately responsible for, or inherit, your spouse’s debt. Similar to what we mentioned above, you being held equally responsible for a debt usually depends on whether it’s in their name alone or both of your names are on the agreement.
There are certain situations where this may vary slightly. For example, when it comes to council tax debt, if you are over 18 and were living in the property when the debt arose, you can still be held responsible even if your name isn’t on the council tax agreement.
If you’re unsure whether you’re liable for a debt or not, be sure to seek expert debt advice from trusted organisations like National Debtline or StepChange.
What is joint debt?
Essentially, joint debt is when two or more people enter into a financial agreement together, this can be between friends, family or partners.
Like any other form of debt, this means that all parties are liable for making sure that the whole outstanding balance is paid off. Once you take a joint financial agreement, your credit files are linked together or ‘associated’ which means that any missed payments will affect everyone involved.
For example, if you have joint finances with an ex-partner, regardless of how much they pay towards the total, you are still responsible for making sure that the whole amount is paid back. If you’re not sure about your credit file, we’ve already written a useful guide on how your credit file affects you.
Recognising if a debt is yours is an important step in getting your finances sorted – read our guide on why you may be liable for a debt for more information.
If you’ve noticed a debt in your name that you didn’t agree to and are concerned that your ex-partner may have applied for this on your behalf without permission, there could be steps you can take to address this, including:
- Reporting it to the police who will investigate things further and decide whether it is a criminal fraud offence.
- Speaking to a solicitor to find out whether you might be able to take private action through the civil courts.
- Talking to the creditor so that they can investigate your claim.
How joint debt can impact you
It’s worth noting that any joint debt you have with a partner means that you have what’s called ‘joint liability’ for the debt – so if your partner doesn’t make payments, you may still be liable for any joint debts after separation.
This can include joint mortgage debt, as you both took out the arrangement together, and applies to any other kind of debt where you both signed and agreed to the terms. It’s worth noting there can be exceptions to this, such as utilities since you don’t need to sign for this, but you can be held liable as soon as you move into a property.
This can cause even more stress if your joint debts become unmanageable, or even worse, if they eventually become problem debt.
If you’re not sure or can’t remember what accounts you might have open then it’s worth checking your credit report through one of the three main UK credit reference agencies (CRAs) - Experian, Equifax, and TransUnion. If you’re a Lowell customer, you can easily access your TransUnion credit score through our mobile app.
Dealing with joint debt after divorce or separation
Sorting out your financial matters after a split can be tricky, but joint finances can be particularly complicated. There’s also an emotional element that might make things feel more stressful if you have joint finances with an ex-partner.
Depending on your personal situation, you might be able to come to an agreement with your ex-partner on how to repay the joint debt together. However, it might be that you aren’t to do so – in this case, we’ve got some steps you might find helpful in the below section on ‘How to deal with debt and divorce’.
There are also other ways to make sure you are protected financially, and MoneyHelper has a helpful guide which goes into more detail about sorting out any joint bank accounts after separation.
If you’re worried about a joint debt that’s being managed by Lowell, please get in touch with us so that we can try help you to find a solution and manage your debt in a way that works for you.
How to deal with debt and divorce
Separations can be very difficult, and if you have combined finances then things can get even more tricky. Many people are not aware that when you break up, you are both equally liable for any debt on joint accounts – even if it was not you who spent the money.
To try make sure things go smoothly in regard to figuring out financial responsibility during a separation, these are some steps you might want to consider taking:
- Know that you are not alone, there are many people and organisations out there to help you - so don’t be afraid to reach out. Debt-focused organisations such as StepChange and National Debtline can offer free and unbiased advice about dealing with your situation. Alternatively, Samaritans and Mind are two charities that can help if you need support with your mental health.
- If you can, communicate clearly with your partner about what will happen with your finances. Talking things over and coming to a mutual agreement can benefit an already difficult situation, however, understandably, this is not always possible. If you’re interested in some conversation starters to try bring the topic up, be sure to check out our guide on how to speak to a loved one about debt.
- Ensure that you tell your bank and creditors about your separation as soon as possible so that they can come to an agreement.
- To keep things separate from your partner going forward when you receive any future payments, you could move your wage and regular incomes into a different account that’s just in your name.
- Work out your new budget. Following a separation, you’re likely to have a reduced income to work with and different outgoings that you need to factor. You should prepare yourself for this by working out a new budget, so you can understand your financial situation and better manage your finances. Our budget calculator is a really easy tool for working this out.
- Along with working out a new budget, it’s worth doing some research and seeing what benefits you might be able to claim. We’ve got a benefits calculator, powered by entitledto, that can help you see which benefits you may be eligible for.
If you’re going through a separation and are looking to remove your financial links with that person, you may be able to get a ‘notice of disassociation’. To do this, all joint accounts must be closed, there can’t be any outstanding joint debts, and you’ll need to contact the credit reference agencies (CRAs) who will remove this link from your credit file. It’s worth noting that the process to get a ‘notice of disassociation’ may vary depending on the particular CRA.
It might also be that you need to consider what you’re going to do about other joint decisions related to your finances, such as your living situation, pensions, and what to do with personal belongings. To find out more about how you could handle these topics, Citizens Advice have a helpful guide on dividing up money and belongings when you separate.
When you’re going through a tricky situation like a split or a divorce, dealing with finances or joint debt after a separation might feel really difficult. Here at Lowell, we’ll always take the time to understand your situation and try to find a way to work with you. If you’re separating from a partner and concerned about a debt that’s managed by Lowell, get in touch and let us know so we can see what we can do to help. Alternatively, you can also manage your Lowell account online independently.
If you’d like to discover more helpful guides on financial and debt-related topics, be sure to check out our Debt Guidance Hub.
Uploaded: 28th November, 2022
Updated: 3rd December, 2024