What Debt Counts as Joint Debt in a Divorce and Who Is Responsible

Debt is one of the aspects of divorce finances that many people are least prepared for. While the focus often falls on dividing assets, the allocation of liabilities is equally important and can significantly affect what the overall settlement actually delivers in practice.

What counts as joint debt

A debt is joint if both parties are named as borrowers or guarantors on the credit agreement. Common examples of joint debt include a joint mortgage, a joint personal loan, a joint overdraft facility, and joint credit cards. The defining characteristic is that both parties are legally liable to the creditor for the full amount of the debt.

It is important to understand that joint liability exists regardless of who spent the money or who agreed to take on the debt. If both names are on the agreement, both parties are jointly and severally liable. That means the creditor can pursue either party for the full amount if payments are not made.

How courts approach debt in financial remedy proceedings

The court considers liabilities as part of the overall financial picture, just as it considers assets. In deciding how to structure a financial settlement, the court will look at the total picture of assets and debts and consider how they should be allocated between the parties fairly.

Where there are joint debts, the court may order that one party takes responsibility for paying a particular debt, or that a jointly owned asset is sold and the debt repaid from the proceeds. It is important to note that a court order allocating responsibility for a debt between the parties does not change the legal position as between the parties and the creditor. The creditor is not bound by the court order.

Our family law barristers can advise on how debts are likely to be treated in your specific case.

The risk with joint mortgage liability

The most significant joint liability in many separations is the mortgage on the family home. Where one party remains in the property, there is often a desire to have the other party removed from the mortgage. However, this depends entirely on the remaining party being able to meet the mortgage lender's requirements in their own name.

If the remaining party cannot obtain a remortgage in their sole name, both parties remain on the mortgage regardless of any agreement between them or any court order. This is one of the practical challenges that needs to be worked through as part of any property settlement.

Sole name debt and how it is treated

Debts in one party's sole name are not automatically treated as that party's sole responsibility on divorce. The court can take into account debts in a party's sole name when assessing their overall financial position and what they need. In some cases, one party taking on sole debt during the marriage for purposes that benefited both parties may be relevant to the overall settlement.

The context matters. Credit card debt run up during the marriage on household expenditure is likely to be treated differently from personal debt run up after the marriage broke down. Understanding how different types of debt are likely to be viewed is part of the early legal advice that makes a real difference.

Addressing debt in the settlement

A well-structured financial settlement should address how debts will be dealt with alongside the allocation of assets. Leaving debts unresolved, or dealing with them only informally, creates the risk of future disputes and ongoing joint liability that neither party wants.

Making sure that the consent order or financial remedy order clearly addresses all significant liabilities is an important part of reaching a genuinely clean break settlement. You can read more about the process in our guide to using a direct access barrister for divorce finances.

To find out how a direct access barrister can help you move forward, contact us here.