One of the first steps in property settlement is identifying whether debts are joint or individual.

• Joint debts: These include mortgages, car loans, or credit cards taken out in both names. Even after separation, both parties remain legally responsible to the lender until the debt is repaid or refinanced.
• Individual debts: These are debts in one person’s name only. While legally the debt belongs to that person, the court may still take it into account when dividing the overall property pool.

The Family Court doesn’t just split debts down the middle. Instead, debts are considered as part of the net asset pool, which includes all assets and liabilities. The aim is to reach a just and equitable division.

Key factors the court may look at include:

• Who incurred the debt: Was it for family purposes (e.g., mortgage, household expenses) or for personal benefit (e.g., gambling, excessive spending)?
• Who has been repaying the debt: If one party has continued paying the mortgage or loan after separation, this may be recognised.
• The purpose of the debt: Debts taken on for the benefit of the family are usually treated differently to debts taken irresponsibly by one party.
• Future needs: The court may consider each person’s ability to repay debts in light of income, health, and caregiving responsibilities.

Even if a loan, credit card, or mortgage is in just one person’s name, the court may still include it in the property pool if it was used for family purposes. For example, if one partner took out a personal loan to pay household bills, the debt might be treated as joint responsibility.

While the court can decide how debts are divided, creditors aren’t bound by family law orders.

This means:

• If you and your ex-partner have a joint loan, the bank can still chase either of you for repayment, regardless of what the court order says.
• Refinancing or restructuring debts into one person’s name after settlement is often necessary.
• It’s important to keep making repayments during negotiations to avoid defaults or damage to credit ratings.

Debts are an important and often overlooked part of property settlement after separation. Whether debts are joint or individual, the court looks at the bigger picture to ensure the division of assets and liabilities is fair. Getting legal and financial advice early can help you protect your interests and avoid long-term financial stress.