When getting a divorce, many people are surprised by the sheer number of financial connections they have made to their spouse, often without considering the long-term impact. From joint bank accounts to combined loans financing bathroom renovations, new kitchens, car finance deals or broadband and television packages for example- most couples make countless financial connections to each other over the course of their marriage.
Many of these, such as a Sky subscription, can be easily cancelled and dealt with. However, home insurance packages, or joint loans taken out to finance items for your marital home are a little more complicated. What happens to the associated accounts? How is the money split? What happens if one ex tries to clear the account?
There are a few steps you can take to ensure that joint finances are dealt with fairly. Firstly, if you’ve got a joint bank account, you should contact your bank and let them know you are separating. They can put restrictions on the account preventing either of you increasing the overdraft, or taking out large sums of money. They can also suspend online or telephone banking and, if relevant, ensure your and your ex’s wages are paid into separate accounts.
If you are worried that your spouse may clear out an account and leave you high and dry, ask your bank to freeze it so that no assets can be accessed by either party. Remember that any assets removed from joint accounts will be taken into consideration later on – so if they take money out of a joint account, they may receive a smaller divorce settlement. If a loan has been taken out in both your names, consider refinancing the existing loans into separate loans of equal value.
If you do freeze your account, both you and your ex will need to sign a letter un-freezing it.
Joint Mortgages and Loans
It’s important to remember that if you took out a joint mortgage or loan then you are both responsible for any accumulated debt. If your ex can’t or refuses to pay their portion, then you will be liable (and vice versa). For example, if you took out a loan of £10,000 to renovate your home and buy furniture with and the loan is in both your names, each person is liable for the full debt. This means if your spouse decided not to pay anything towards the debt, you would have to pay the full £10,000.
There are some options available to you:
- Inform your bank of the split, and ask them to put restrictions on any joint accounts to prevent further debt.
- Organise an agreement with your bank to make lower monthly payments.
- Organise an agreement with your ex-partner. Either:
- Keep the account open and continue to make payments from it for agreed upon items.
- Agree that one of you will pay off the debt/loan and the other will give a contribution.
If you and your ex can’t agree about what to do, mediation can be beneficial.
If you do find yourself in unaffordable debt, try not to panic and prioritise what you can pay. As the Money Advice Service state, ‘debts that you should pay first include your rent or mortgage, rates or council tax arrears and gas and electricity bills’. If you don’t pay them, you could be subject to visits by bailiffs, court summons and lose services such as heat and electricity. A useful guide, ‘How to prioritise your debts’ can be found here.
On top of this, credit rating agencies like Experian or Clear Score will link your credit rating to your partner’s once any joint account or loan has been taken out. This means if your spouse has been careless with their personal finances, it could impact on you further down the line. Recently, a trend toward disassociation requests, whereby one ex contacts their credit raters and asks them to break the link with their ex has helped people with this issue.
When it comes to credit cards, be warned that there is no such thing as a joint credit card – the sole responsibility for the payment of the debt lies with the main cardholder. Also, while you and your ex may come to some sort of payment arrangement in mediation, bear in mind that these will not mean much to creditors, who will still hold the main cardholder liable for the full balance of the debt. Your divorce is separate to your debt arrangements, and neither has any bearing on the other.
When it comes to money and divorce there is much to organise, work out and discuss. Ensuring you talk through your options with your ex to prevent foul play can benefit you both greatly.
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