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Read our straightforward guide to dealing with your debts and finances if you’re divorcing or separating from your partner.
At Debt Advisory Centre, we know that an unforeseen change in your circumstances can result in problem debt. Divorce, or the break-up of a major relationship, is one life change that can leave people less financially secure than they once were.
Divorce can be a very challenging experience and you may well be feeling a range of strong emotions if you’re in the thick of it. However, the decisions you make at this time will have a big impact on how well you and your partner deal with the separation financially, so it’s important to keep on top of certain things, including any debt you share.
Before we get into the nitty gritty it’s important to mention that when you decide to split up you should contact your bank and other providers and ask them to freeze your accounts. This will protect you as your ex won’t be able to empty your savings accounts or run up any further debts.
Let’s have a look at the type of debts you might be dealing with and how you should handle them if you’re divorcing or separating from your partner.
Prioritise your payments
If you’re divorcing, you may have found that the demands on your money have increased and be worried that you won’t be able to afford them all. If you’re in this situation, it’s important to remember that some bills and payments are worse to miss than others because the consequences of missing them can be very serious.
Your rent/mortgage payments should always remain a priority – regardless of what you and your ex want to do with the property in the long-term. There are other priority payments you need to stay on top of, including any secured debts, your council tax and utilities. Our blog What are priority and non-priority debts should give you all the info you need.
It might be worth sitting down and making a list of all your outgoings. Put the most important ones at the top and make sure they get paid before anything else.
Don’t ignore the other debts
If you think that you’re going to fall behind with your repayments for any reason, whether it’s towards joint or single debts, you need to get in touch with the lenders and let them know. Try to get an idea of how much you’ll be short by and when you think you’ll be able to get back on track with your contractual payments.
It’s sometimes possible for lenders to put some sort of arrangement in place, like a payment holiday, so you can get back on more secure financial footing. They may also be able to freeze interest and charges so that you’re not charged for any payments that you do miss.
Let’s look at what you should do about the most common financial links: joint bank accounts, mortgages, loans and overdrafts.
Joint bank accounts
If you’re currently using a joint account, you will need to open a new single account in your name at some point. You’ll also need to arrange for any wages and benefits to be paid into this new account.
When it comes to the joint account, you can contact the bank and ask them to change the terms so that they need permission from both account holders before any withdrawals or payments can be made. If you want to do this, you will need to sign a mandate that allows your mortgage and any other essential bills to be paid from the joint account.
Joint unsecured debts
When you take out any kind of joint credit, like a joint loan, you are both equally responsible for the whole of the debt – not just half each. That means that if one person stops paying, the creditor will start chasing the other person for the whole amount.
This goes for any overdrafts you have on joint accounts as well, and you won’t be able to close the account until the overdraft is paid off in full.
While you’re going through a divorce it’s very important that you remember your responsibility as a borrower and try to keep up with any joint payments. Hopefully, you’re in a situation where your ex is perfectly willing to contribute to the repayments as well, and it would be in their best interest to do so as any defaults will negatively affect both your credit histories in the same way.
If you’re going through a difficult split and your partner isn’t willing to contribute, you need to get in touch with the lender and explain the situation to them as soon as possible. They might be able to put restrictions on the account to stop your ex from running up further debts, or accept lower payments from you while you try to come to a compromise with your ex.
If you are the main account holder on a credit card account, it’s worth asking your lender to cancel any additional cards that your partner uses. This is because you will be responsible for all debt on the account no matter which card was used and who spent the money.
If you’ve got a joint mortgage with your ex, concern over what will happen to your home will probably be at the forefront of your mind.
One option is to simply sell your house and split the money, if neither of you can afford to pay the mortgage by yourselves. Just make sure that you keep up with the mortgage payments while you’re in the process of selling.
If you want to stay in your house, you’ll either have to pay off the mortgage altogether - which is unlikely to be a realistic option - or buy your ex-partner out. If you wanted to take on the mortgage by yourself, your lender would have to agree that you could afford it. They would treat you as if you were a new applicant and take you through their affordability tests to make sure you could afford the payments.
Breaking the financial link
If you want to break the financial link between yourself and your ex-partner, you can apply for something called a Notice of Disassociation. It’s a good idea to do this as soon as possible – once you closed any accounts that you hold jointly - as it will stop any unpaid debts that your partner has in their name negatively affecting your chances of being approved for credit in the future.
Just be aware that you won’t be able to get a Notice of Disassociation until you’ve closed all your joint accounts down.
Communication is key
The break-up of a major relationship can be a tough thing to get through, as we said at the start. Life is likely to be very emotionally charged, so much so that you and your partner may be having trouble focussing on anything else.
Unfortunately, this may negatively affect your ability to communicate with each other. Clear and fair communication is key to getting through this difficult time. Mediation could be the answer if you’re having trouble working everything out, and it could work out as more cost-effective than going to court. National Family Mediation provides services UK-wide, and it may be possible for you to get free mediation sessions if one of you is already receiving legal aid.
If you feel that your debt problems have been caused or made worse by your divorce or separation, there is help out there. The Money Advice Service is a Government-run website focussed on providing all kinds of financial help and support.
Alternatively, a debt solution could be the answer. Make sure you do some research into the different ones available and you seek professional advice to find out which one would be best for you. If you’d like to speak to an expert about which one would be best for you, use the options on the left to get in touch with one of our advisors.
by Christine WalshBack to blog home