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Christmas, Covid-19 and debt in the family court

We take a look at how debt is considered by the family court in divorce proceedings

2020 has been a challenging year for families. We have sadly seen record numbers of redundancies (and reduced income for those who have remained in secure employment) together with an increase in divorce rates.

As the festive period draws ever closer, UK debt charity, Stepchange, has warned that low and middle-income households are turning to emergency loans to make ends meet with many parents reported to be buying Christmas presents under “buy now pay later” agreements. We take a look at how debt is considered by the family court in divorce proceedings.

How will debts be considered by the family court?

When determining the division of financial assets in divorce, the family court will start by adding up the debts and liabilities of each party and will deduct them from the total family assets.

There are a number of considerations that the family court will take into account when dealing with debts and some which have little bearing on the court’s decision. The most relevant of which are set out below: 

The name of the debtor

It may be surprising to some divorcing couples that the person in whose name a debt is bears little weight in the family court for the purpose of dividing assets as the court will strive to achieve a fair solution for both parties.

However, the creditor will only have legal redress against the named debtor.

Is the debt matrimonial?

If the court considers a debt to be ‘matrimonial’, the debt will be given full status for consideration on financial settlement. Key features of a matrimonial debt are that it was incurred during the course of the marriage and that both parties would have been likely to have benefitted from it. If so, it is arguably fair that the responsibility should be shared.

However, if the debt is non-matrimonial, for example because it was incurred prior to the marital relationship, it may be arguable that the debt should remain the sole responsibility of the debtor.

What was the purpose of the debt?

The purpose of a debt will depend upon the facts of each case. A clear example would be to compare a husband using a credit card to buy Christmas presents for children in comparison to him using the credit card to buy jewellery for a new partner.

In some circumstances, the court may “add back” to the matrimonial assets money which one party has spent unreasonably. On paper at least, this would mean that there would be more assets available to be divided by the court in favour of the person who did not spend the money. However, for the court to consider spending to be so unreasonable as to justify adding back, the spending has to be “wanton” and “reckless” and extreme in the context of resources available to the family.

Specialist legal advice should be taken in relation to debt and its treatment upon divorce, including what can be done to stop or reduce debt that continues to be accrued.

If you are experiencing difficulties with debt it is important to seek help from experts about debt /consolidations such as the Citizens Advice Bureau.

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