Are Debts Shared in a Divorce in Australia

Debts and Divorce

When people get married, divorce is the last thing on their minds. They are only thinking about how to make their relationship richer and more fulfilling than ever before. They spend a lot of time, effort, and money trying to set up a happy home. However, when a divorce does occur, not all resources and energy you put into the family can be returned or reimbursed to you. What you should aim for is an equitable and just division of assets and liabilities in the separation. With the help of the eminent family lawyers at Maatouks, that should hardly be an issue. Call us today for a free phone consultation.

What is a Debt in a Divorce

The average Australian household has a debt of over a quarter of a million dollars. That is quite a significant amount and cannot be dismissed in a divorce settlement. Property settlement is one of the most important aspects of divorce proceedings, in which the complete assets and liabilities of both parties are assessed and divided in an equitable and just manner between them. However, the aim of both sides is to maximise the assets they receive while minimising the debts they are made responsible for. Debts in property settlement can either be incurred by oneself or together with your spouse. In either case, a decision must be made regarding whether to include the debt in the asset pool depending on the purpose and other aspects of the debt.

Can I be Held Liable for My Spouse’s Debts During a Divorce

The nature of the debt and the financial conditions and responsibilities of each party plays a role in deciding who will have to take up a debt or a portion of it. If the debt was incurred by only one of the spouses for their individual purpose, then, the most likely course for the debt is to remain with that person. However, if the debt was a decision of both parties taken for the upkeep and improvement of the family, it would be added to the joint asset pool.


If the debts are minor, then, to prevent complications, the judge might decide to let each spouse handle their own debts. However, hardly any case is that simple and hence, the question of debt settlement comes. A lot of factors must be considered when deciding who needs to take up which debt, like the current financial state, future financial responsibilities, number of dependents, if any, medical conditions, present and future earning capacity, any foreseeable earnings or spendings that will seriously affect their finances, and so on.


Based on all these factors, the judge will decide how to separate the debts. In this process, it is entirely possible that a debt originally taken by your spouse may come upon you and vice versa. There is also the possibility that a loan may be refinanced so that only one party will have to take care of it, making things simpler. If you have sufficient assets, they might be sold to repay some of these debts in the property settlement in a bid to allow the spouses to step into their new life with zero or minimal historical debts from their deteriorated marriage or relationship.

Are Post-Separation Debts My Responsibility After Divorce

A lot of people make the mistake of thinking that the joint asset and liability pool to be divided gets closed and calculated on the day of the separation. But that is not true. The asset pool is calculated on the day of receiving the court consent orders for a binding financial agreement. Until then, any earnings, expenses and debts incurred will be counted into the asset and liability pool.


Often, this information may cause one or both spouses to start spending or taking debts with the intention of depriving the other of the assets to be divided. This is called dissipating the asset pool. If the judge deems that your post-separation debts were taken irrationally or illegitimately, with an intention to dissipate the asset pool, he may exclude that debt from the asset pool completely.


It is not uncommon for lawyers to use wastage or dissipation of assets to argue against valid debts and expenses to secure more assets for their client. You can argue against it and show the legitimacy of the debt, but the best solution is to finalise the financial agreement as soon as possible after the separation.

Which Debts are Excluded from the Asset Pool During Divorce Proceedings

As we have talked about before, the court decides whether a debt will be included in the joint liability asset and liability pool or not depending on the purpose of the debt and which parties it benefits. Depending on the complete assessment of these factors, the judge will decide who is responsible for the debt. However, there are a few common cases in which a judge will invariably decide not to include a debt in the pool. These include:

 

  • Debts That Were Taken By One Of The Two Spouses Solely For Their Benefit And The Money Obtained Did Not Go Into The Family, Matrimonial Joint Expenses, Or The Other Spouse Will Be Considered Solely The Responsibility Of The Spouse Who Took The Debt. It Does Not Matter If The Debt Was Incurred Before, During, Or After The Relationship.
  • Debts Incurred Due To Irresponsible Spending Like Gambling Or Drugs, That Did Not Benefit The Other Spouse And In All Probability, Probably Harmed The Spouse And The Family, Will Be Considered As The Sole Liability Of The Responsible Party.
  • Debts Due To Reckless Actions That Reduce The Asset Pool, Like Giving Away Joint Assets To Other People, Incurring Losses On A Personal Front Like Your Own Business, Or Paying Other Members Of The Family Not Involved In The Relationship Or Marriage, Which Resulted In The Reduction Of The Joint Asset Pool Will Again Come Under The Responsibility Of The One Who Took Such Actions.
  • Liabilities Incurred Through “Waste”, I.E. Deliberate, Malicious Actions Meant To Reduce The Asset Pool Will Again Be Vested In The Responsible Party Only. However, It Must Be Proved That Those Expenses Can Be Classified As A “Waste”. For Example, If The Money Was Spent Right Before Financial Disclosure, If The Expense Was Unnecessarily Lavish, Or If An Attempt Was Made To Make A Joint Asset Look Like An Individual One Or Conversely, An Individual Debt Look Like A Joint One, It Can Be Excluded From The Joint Asset Pool.

Visit a Family Lawyer in Sydney if You are Worried About Your Debt After Divorce

The emotional turmoil of going through a divorce often causes one to overlook the financial aspects, which can decide your future. Instead of taking a risk, it is advisable to consult a family lawyer to sort out these aspects of a divorce. If you need expert family lawyers in Sydney to help you with debt and asset settlement after divorce, Maatouks Law Group is the best choice for you in Sydney.

Contact Us

Call us, email us, or book an appointment through our website to get in touch with the best family lawyers in Sydney. Contact Maatouks today for a free phone consultation.

9 September 2024
Key Questions to Ask at Your First Family Lawyer Consultation
by Chris Van Langenberg 27 June 2024
Domestic violence is a critical issue that significantly influences custody decisions under Australian family law. The guiding principle of the Family Law Act 1975 is the best interests of the child, which directs all decisions concerning child custody and visitation. Understanding Domestic Violence in Family Law Domestic violence includes a spectrum of abusive behaviours, such as physical, emotional, psychological, and financial abuse. The Family Law Act defines family violence as any violent, threatening, or controlling behaviour that induces fear in a family member. This comprehensive definition ensures the courts address various forms of abuse. How Domestic Violence Influences Custody Decisions 1. Best Interests of the Child The child's best interests are the paramount consideration in custody decisions. The court assesses several factors, prioritising the child's safety and well-being. Protecting children from physical and psychological harm, including exposure to domestic violence, is crucial. 2. Presumption of Shared Parental Responsibility Generally, Australian family law assumes both parents should share parental responsibility. However, this assumption is void if there are reasonable grounds to believe that a parent (or someone living with a parent) has engaged in family violence or abuse. In such scenarios, the court may grant sole parental responsibility to one parent to safeguard the child. 3. Impact on Contact Arrangements When deciding child contact arrangements, the court considers any existing domestic violence orders (DVOs) and their circumstances. A DVO doesn't automatically bar a parent from seeing their child, but it heavily influences the court's decisions. Depending on the severity and nature of the violence, the court may order supervised contact or, in extreme cases, no contact. 4. Supervised Contact If the court deems unsupervised contact with a parent potentially harmful, it may mandate supervised visits. These visits can occur at a contact centre or under the watch of a trusted third party, ensuring the child's safety during interactions. 5. No Contact Orders In severe instances where any contact with the abusive parent would harm the child's well-being, the court might prohibit contact entirely. This decision prioritises the child's safety and emotional health. Additional Considerations in Custody Cases Involving Domestic Violence The Family Law Act specifies considerations for the court in cases of domestic violence: Nature and Circumstances of the Violence: The court examines the type, frequency, and severity of the violence and its context. Impact on the Child: The physical and psychological effects of the violence on the child are thoroughly evaluated. Parental Capacity: Each parent's ability to care for and protect the child is assessed. Child's Views: Depending on the child's age and maturity, their views may also be considered. Legal Framework and Protections 1. Domestic Violence Orders (DVOs) DVOs are legal measures designed to protect victims of domestic violence by restricting the abuser's behaviour. These orders can prevent the abuser from contacting or approaching the victim and their children, playing a crucial role in custody and visitation decisions by highlighting the need for protective measures. 2. Family Court Interventions The Family Court can implement various actions to ensure children's safety in domestic violence cases. These actions include appointing an Independent Children's Lawyer (ICL) to represent the child's interests, ordering psychological assessments, and obtaining evidence from police and child protection agencies. The court may also require the abusive parent to attend parenting programs or counselling. 3. Mediation and Family Violence Typically, parents must attend mediation before seeking court orders for parenting arrangements. However, in domestic violence cases, this requirement can be waived to avoid endangering the victim. The court acknowledges that mediation may not be suitable when there is a significant power imbalance due to abuse. Conclusion  Domestic violence significantly impacts custody decisions in Australia, with the child's best interests as the primary concern. Courts strive to balance the child's need for meaningful relationships with both parents while ensuring their safety from harm. Legal tools like DVOs and the court's protective measures are vital in safeguarding children in these situations. If you're facing a custody battle involving domestic violence, it's essential to seek legal advice to understand your rights and the protections available for you and your child. At Maatouks Law Group, our experienced Family Lawyers in Sydney can provide the guidance and support you need during this challenging time.
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While the internet has brought the world closer, social media has taken it a step further, making it feel like everyone is just a click away. This connectivity allows us to stay in touch with family and friends, regardless of physical distance. However, this ease of connection comes with a need for caution. As users of social media, we must be mindful of what we share online. This is especially crucial during family law disputes, where indiscriminate posting can have serious consequences. The Impact of Social Media on Family Law: The Real-World Effects of Online Words: It's important to recognise that your online activities can have tangible consequences, affecting perceptions and behaviours. Courts now consider social media posts, comments, videos, and activities as evidence in family law cases. If you're involved in such matters, reducing your social media presence can be beneficial. From Sharing to Sanctions: Social Media Mistakes to Avoid: If you habitually post derogatory content about your ex-partner or share personal details freely, it's time to reconsider. These actions can backfire and negatively impact your case, especially if you're seeking a favourable judgement. Understanding the Legal Risks: Crossing Boundaries: Social Media and Family Law Violations: Section 121 of the Family Law Act prohibits sharing information about your family law issues on social media, with potential legal repercussions. Posts indicating violent behaviour, substance abuse, or other negative traits can harm your case in court. Digital Evidence: How Your Online Activities Can Influence Your Case: Your digital footprint can be scrutinised as evidence, reflecting on your parenting, financial status, and the veracity of your claims. Be cautious with your social media behaviour to avoid undermining your position in custody battles or financial disputes. Critical Missteps to Avoid: Balancing Privacy in Parenting and Property Disputes Online: It's crucial to understand the boundaries of sharing information online, especially regarding your ex-partner, co-parenting situation, or ongoing case details. Clear communication with your ex-partner about what can be shared is essential. Digital Hazards: When Social Media Posts Become Legal Liabilities: Social media should not be a platform for venting frustrations or making threats. Any statements or videos perceived as threatening or self-incriminating can be used against you in court. Choose your online words and actions carefully. The Evidence Factor: Screenshots as Legal Proof: The Digital Evidence You Leave Behind: Screenshots of your online posts can serve as solid evidence in family law cases. They can support testimonies or aid in cross-examinations, influencing the legal outcomes significantly. The Role of Social Media in Financial Disputes: During financial settlements, ensure your social media posts do not contradict your claims of financial hardship. Posts indicating a lavish lifestyle can undermine your case. Strategic Social Media Use: Guidelines for Collecting Evidence on Social Platforms: When gathering evidence online, adhere to ethical standards. Avoid deceptive practices like fake accounts or hacking. Ensure any collected evidence is supported by additional proof. Navigating the Challenges of Digital Evidence: For digital evidence to be admissible, it must be verified and authenticated. Proper collection, storage, and handling are crucial to maintain its validity. Any breaches in this process can raise doubts about the evidence's authenticity. How to Protect Yourself: When to Limit Your Social Media Activity: During legal proceedings, it's wise to limit your social media activity. If you must post, do so thoughtfully, as your posts can be used against you. Enhancing Your Social Media Privacy: Familiarise yourself with social media platforms' privacy settings, use strong passwords, enable two-factor authentication, and be selective about who can view your posts. Precautions and Best Practices: Guidelines for Social Media Conduct During Legal Disputes: Exercise restraint in your social media conduct during legal disputes. Avoid posting impulsively and consider how your posts might be perceived in relation to your case. The Importance of Legal Advice in Managing Social Media Risks: A legal advisor can help you understand the implications of your social media activity, guide you on what to avoid, and advise you on strategically using social media to support your case. They can also educate you on your rights and responsibilities in this context.
27 June 2024
Navigating a divorce in Australia is challenging, but with proper support, you can proceed smoothly. Separating your finances from your ex-partner is essential and must be done decisively. Open discussions and clear arrangements are crucial to avoid financial confusion later. The Challenge of Debt in Divorce Divorce financial matters involve dividing both assets and debts. Ensuring fairness in both is difficult, especially with debts. Beyond Asset Division: The Hidden Battle of Debt in Divorce Liabilities like mortgages, credit card loans, personal loans, and student debts must be managed when a couple separates. These debts need arrangements for repayment or continued payments. Dividing assets is hard, but splitting debts is more complex, often leading to unfair distribution. Why Debt Division is Harder Than Asset Splitting Partners are eager to claim assets but reluctant to share debts. This common attitude complicates fair debt division. The long-term financial impact and the challenge of equitable debt distribution make it tougher than splitting assets, which is more straightforward. Seeking Fairness in Division Fairness is essential in dividing both assets and debts. Assessing both parties' debt situations helps determine responsibility and whether debts were for mutual benefit. Future financial capacities must also be considered. Equity Vs Practicality: Striving for Fairness in Debt Division Fair debt division requires balancing equity and practicality. While equity involves contributions and financial circumstances, practicality focuses on feasible solutions. Flexibility, cooperation, and open communication are key. A thorough financial assessment, including income, assets, and liabilities, is necessary. The Legal Framework for Fair Debt Allocation: Insight from Family Law The Family Law Act 1975 governs debt allocation for separating couples. Courts consider factors like when the debt was incurred, each party's contributions, and the impact on children in asset and debt division. Practical Steps for Fair Division Regardless of emotions, financial matters must be approached objectively for an equitable debt-sharing arrangement. A Slow and Steady Approach to Debt Division Debt division requires time and careful steps, including gathering financial information, assessing joint debts, prioritising high-interest debts, and exploring options for repayment. Honesty and cooperation are vital. Unveiling Hidden Debts: The Importance of Full Disclosure in Divorce Proceedings Both parties must legally disclose debts and assets during separation. Hiding debts can hinder fair division and lead to legal consequences and trust issues. The Role of Contributions and Circumstances in Debt Division Financial contributions include income, assets, and debt payments, while non-financial support also matters. 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Staying Ahead: Preventive Measures to Avoid Taking on an Ex’s Debt Prenuptial agreements help, but staying aware of earnings, expenditures, borrowings, and outstanding debts during the relationship is crucial. This clarity aids in determining who takes on what debt during separation. Financial Literacy: A Shield Against Post-Divorce Debt Burdens Financial literacy involves understanding financial obligations, budgeting, managing debts, and saving. This knowledge helps avoid post-divorce debt burdens and ensures better financial circumstances. The Power of Financial Awareness in Preventing Debt Disputes Financially aware partners encourage open communication about assets and debts and take proactive measures like prenups. This awareness helps prevent major debt disputes. Taking Control of Your Financial Future Focus on long-term financial consequences and maintain control to ensure a secure future. Reclaiming Financial Independence After a Divorce Assess your financial situation, including income, expenditures, assets, and liabilities, to prevent unfair debt division. Highlight high-interest and long-term debts, and consider your repayment capacity. Seek professional financial guidance for debt-sharing agreements. Legal Recourse for Unfair Debt Division: Know Your Rights If debt allocation feels unfair, seek legal help. A family lawyer can guide you on your rights and assist in reopening your case if necessary, leading to reassessment of debts and assets. Developing a Financial Game Plan Post-Divorce After debt division, create a financial plan for a stable future. Seek professional advice if needed, and design plans that accommodate short- and long-term goals and savings. This helps maintain financial control and avoid future entanglements.
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