Help if you are getting divorced and dealing with debt

Posted on March 31, 2016 by Mark Stonestreet

Are you getting divorced and have creditors constantly contacting you demanding payment which you are unable to make at present?  Divorce is a difficult and worrying time for everyone involved due to the separation but also on those closely associated to you as well.

Divorce is particularly difficult in that you are separating from someone who you believed was your soul mate and now having to decide how everything should be divided between you both.  This can be particularly difficult and troublesome when there are children involved as well.  There are various matters that will need to be addressed during the process such as the matrimonial home, credit cards, loans and bank account to name a few of the issues that you will need to resolve.

You may have a property which is secured by way of a mortgage which may need to be sold in order to repay some of your creditors as you or your partner may not be able to keep up with the mortgage payments.  You and partner will need to decide what you are going to do with the property as to whether it should be sold or whether either one of you is currently in a position to maintain the monthly mortgage payments.  You should try to agree who will be responsible for maintaining the monthly mortgage repayments and if you are not able to maintain them then you should speak to the mortgagee(s) as soon as possible and advise them of the position you currently find yourself in.  Most mortgagees will be sympathetic to your circumstances and maybe able to offer you a payment break or a period of time to sell the property before commencing any enforcement action.  You will not know what they can do to assist you unless you give them a call to find out. 

The mortgagee(s) will not automatically transfer the mortgage to either one of you as they will need carry out their normal credit checks and could decide that neither of you are able to maintain the payments due.  The mortgagee might not want to release you or your partner from the mortgage as they presently have two people providing them with security which they might feel is in their best interests to maintain.  Any agreement you might be able to reach with the mortgagee will depend on the various lending criteria of the mortgagee.  The best thing to do is to speak to them sooner rather than later so that you know what the position is with regards to the property.  The property is one of the biggest issues you will face in dealing with your divorce but once this one is sorted you may find that a whole weight will suddenly be lifted.  If the property is to be sold whoever is remaining in the property until it is sold will be required to vacate the property prior to completion although in some cases they may be asked to vacate prior to exchange.

You also need to be aware that if you borrowed money in yours and your partners joint names such a loan that was used to buy something which your partner has the benefit from, you are still responsible for this debt even after you get divorced.  As the debt was taken out in your joint names and your partner may agree to be responsible for the debt if they do not make the payments then the creditor can seek to recover the entire balance outstanding from you.  They will not simply look for your half of the outstanding balance due but the whole amount as the debt is joint and several and both parties are responsible for the entire debt even after you get divorced. 

The exception to this rule, subject to certain criteria, is a credit card, the person responsible is the main card holder and not the person who received the additional card.  It is likely to be the person who the credit card statement is addressed to.  One of you will be main account holder and the other person will have been sent an additional card at the main cardholders request.  The person with the additional card does not have any legal responsibility to repay the debt back nor do they have any responsibility to repay the main cardholder either.  It does not matter who spent the money or how and on what it was spent.  As far as the credit card company is concerned they will look to recover any balance due to them from whoever the main cardholder is.  It does not make any difference if the item purchased is going to remain with the additional card holder they do not have to make any contribution whatsoever in regards to the balance due to the credit card company.

It is likely that you will need to open a new bank account and arrange for your salary to be paid into it and have any of the debts which you are solely responsible for paid out of this account.  This is particularly important if you used to have a joint account as you and your partner are now separating you will need your own bank account so that you have control over your finances.  There are various high street banks and building societies who will offer you some kind of incentive to move your account to them.  This is a fairly straightforward process and one that can be done quite quickly without too much fuss.

If you are struggling to maintain the payments to your creditors then you should seek professional help and advice as soon as possible.  The sooner you seek professional help the sooner that you can have a plan that will deal with your creditors and can prevent them from instigating recovery proceedings against you. 

By seeking professional help at an early stage means that it might be possible to agree a full and final settlement with your creditors which might save you money in the long term.  It also can prevent your credit rating from plummeting as you might be able to avoid having to enter into a Voluntary Arrangement or worse still Bankruptcy.

Here at Frost Group we will listen to you and offer you some practical and useful advice on how we can help you through this difficult and distressing time.  We offer initial advice by telephone, completely free and totally confidential on 0845 260 0101.