Debt

When considering a division of property following the breakdown of a relationship or marriage we look at the assets and liabilities of the parties before deciding on a just and equitable division between them.

And an Order by a family law Court can stipulate how debts of the parties are to be treated.

But there is a vital question that has to be asked when dealing with liabilities – whose name is the debt in?

The answer to that question can have a significant impact on how Orders are drafted and their effectiveness in the long run.

For example:

Problem Orders

• the Wife is ordered to pay the credit card debt of the parties
• that credit card is actually in the name of the husband
• the wife fails to pay the debt
• the bank pursues the husband for monies owed in accordance with the terms of the credit card application.
• the husband has to pay the credit card debt despite what the family law Court orders say.

Well drafted Orders

• the parties are ordered to refinance the credit card debt currently in the name of the husband into the wife’s sole name
• the wife is then solely liable for repayment of that credit card debt now in her name
• should the wife be unable to finance the credit card debt currently in the name of the husband into her sole name within 28 days then “ABC asset” (e.g motor vehicle) is to be sold within 28 days and the proceeds divided so as to pay out the credit card debt (including extra interest) in the name of the husband and the balance to then be paid to the wife
• pending compliance neither party is allowed to increase the credit card liability.

It is important that parties consider the long term effect of Orders - and think of problems that can arise in the future - just because you are getting along now, or something seems simpler now, does not mean that  there won't be problems later on. If the Orders are properly drafted there will be sufficient protection for both parties.