Divorce and Debt: Strategies for Managing and Splitting Financial Obligations

In this article we’re looking at divorce and debt and sharing strategies for managing and splitting financial obligations.

When a marriage ends in divorce it will often involve the disconnection of a shared life including routines, company and, of course, finances. Family solicitors in York spend a considerable amount of their working hours trying to help divorcing couples to reach a solution in terms of their finances.

In this article, we’re looking at divorce and debt and sharing strategies for managing and splitting financial obligations when a marriage breaks down.

How Does Marriage Connect Finances?

During a marriage – particularly a long one, a couple’s finances and financial obligations will be inextricably linked in many ways, including: 

• Mortgage – In many cases, a married couple will own a property on which they both contribute to mortgage payments – often a significant amount of money per month.

• Assets – During the marriage, the spouses will usually have accumulated assets of some value such as cars and other property. 

• Investments – Some married couples choose to invest in stocks and shares and other products during their marriage.

• Pensions – In the course of a marriage, one or both parties may accumulate cash through a personal or employment based pension scheme.

• Childcare – Depending on their circumstances, a couple may be responsible for external childcare costs as well as day to day costs related to children.

• Debt – Unfortunately, during their relationship, many couples will accrue debt – particularly in recent times where the cost of living and energy crises have put many UK residents under a considerable amount of financial pressure.

Strategies for Managing Debt and Divorce

Managing and Splitting Financial Obligations

As mentioned, most couples enter into all kinds of financial responsibilities and, while this may be perfectly fine for most, it can also become extremely complicated – and acrimonious – should they decide to end the marriage. 

In this section, we’re looking at strategies for managing and splitting financial obligations in the event of a divorce.

Keep Hold of Financial Documents

Before you can begin building your financial strategy, you need to know exactly where you both stand in terms of wealth and debt. Because of this, you will need to gather statements and printouts of all of your finances – both incoming and outgoing – and this will include: 

• Bank statements from joint current and savings accounts
• Credit card statements.
• Bills and invoices.
• Mortgage statements.
• Investment portfolio statements.
• All income streams.
• Debt and liability documentation.
• Pension scheme contributions and balances.
• Life insurance policies.

Once you have all of this information and documentation in front of you, you will be able to put together a spreadsheet highlighting what’s coming in, what’s going out and what’s held in pooled accounts, for example, savings and investments. 

If you have a significant amount of cash and assets or your situation is a complicated one, you may want to consider hiring a financial advisor to help you sort through this.

Dividing Assets

The next step is, without a doubt, the trickiest one. Here, you will need to have some honest and frank discussions in order to decide how to fairly divide your assets, debts and obligations. Dividing marital assets is rarely as simple as a 50/50 split as it depends on a number of factors including: 

• Balance of contributions – One partner may have contributed more to mortgage payments and savings than the other.

• Employment – One partner may earn significantly more than the other.

• Childcare – One partner may have contributed / earned less due to childcare responsibilities.

All of these things will need to be taken into consideration when figuring out how to divide your marital assets and, while a solicitor may be able to help you with this, it’s always a good idea to try to reach an agreement between the two of you first. 

Use this information and offset it against a reasonable estimate on how much the two of you (plus any children) will need to live on. This ishould give you the tools to work out a fair settlement for both parties by sharing assets and responsibilities.

Divorce Consent Order

Once you’ve reached an agreement, it’s essential that you then apply for a Divorce Consent Order. This is a legal agreement which is created to confirm the agreement that you have reached and to protect it in the future. Obtaining this Order will usually take approximately 10 weeks so it’s a good idea to make this a priority. 

Managing Finances After a Divorce…

During a divorce, it’s easy to let finances blow the split all out of proportion but it doesn’t have to be that way. By working together – even if it’s the very last time that you do so – you should be able to reach an agreement that works for you both and move forward with your lives. 

If, however, you are unable to do this, a family law solicitor will be able to help you to reach a settlement. Though, the more you’re able to achieve by yourselves, the less legal fees you will be paying.