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Divorce and debt - who's liable?(4 Posts)
I posted this on the relationships thread but it's probably better here. Any advice gratefully received.
It looks like my BIL is on the brink of divorce. He's been with his wife for a few years but married for just over one. His wife has a history of building up credit card debts whereas he has always been extremely tight good with money.
He has ended up in a lot of debt (20k, not including mortage debt, obviously) as a result of keeping her in the style to which she is accustomed. Money has always been a big issue between them and it appears that he has always, stupidly, given her what she wants). A few months ago things became critical. At least one mortgage payment was missed as a result, maybe more. Since then BIL has been juggling his relatively meagre salary to cover all outgoings, whilst she continues to spend all she earns, refuses to address the issue or pay back anything other than the minimum. She also pays less into their joint account than she should.
At some point he used his credit cards to pay off a portion of her credit card debts (around 5k I think but not sure), in addition to the other debts he'd built up paying for, amongst other things, their wedding and lavish honeymoon.
He has now moved out of the marital home (which he continues to pay for as before). There's no equity in it by the way, and they are likely to be in negative equity.
My question is, is he liable for all of the debt in his name or can he pursue her for any of it?? As I said earlier he can prove that he was always debt-free prior to the marriage.
A sad and sorry state of affairs.
Debts can be taken into account as part of the overall divorce settlement but if they are in your BIL's name he has a contract with the lender, is liable and will be pursued by the lender for any arrears. On the other hand when debts/mortgages are in joint names both parties are liable.
Your BIL and his wife could sit down and go through the figures, possibly with the help of a mediator if communication is difficult, to see whether agreement can be reached about who pays what in the short and longer terms. If his wife has sole use of the former matrimonial home it wouldn't be unreasonable for her to pay the mortgage (or at least part of it) as long as she can afford to do so.
What happens if he stops paying his share of the mortgage and she defaults (with his name still on the mortgage agreement)? That's pretty much guaranteed to happen. He recently stopped paying the council tax and she went mental.
I think they need a mediator for the short term at least. And a solicitor for the divorce. They are in a kind of limbo for the moment though - he seems like a rabbit caught in the headlights.
If the mortgage falls into arrears the lender would pursue them both and ultimately the house could be repossessed. This would affect both parties credit rating and ability to raise loans in the future.
There is no reason why your BIL shouldn't open a new bank account in his name only, arrange to have his salary paid into it and either pay the mortgage and loans directly or transfer money into the joint account to cover the debts. The other thing worth considering is talking to the mortgage lender to determine whether it is possible to take a payment holiday or change a repayment mortgage to interest only.
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