Going through a Divorce is an emotional rollercoaster. Amidst the personal upheaval, there’s a practical and often stressful reality to face: money.
Specifically, the topic of debt in Divorce is one that can cause a great deal of anxiety. You’ve built a life together, and that life likely includes shared financial commitments.
Now that you are going your separate ways, you are probably wondering what happens to those outstanding loans and credit card bills. It’s a completely valid concern, and you are not alone in asking it.
What Happens to Debt in a Divorce in Singapore?
When a couple decides on a Divorce, all their assets, like property and savings, are pooled together to be divided. But it’s not just about the assets. The liabilities, or debts, are also part of the financial picture. Under Singapore law, specifically the Women’s Charter, the Court aims to divide matrimonial assets in a manner that is “just and equitable”. This principle also extends to how debt is handled in Divorce.
The Court will look at all the debts accumulated during the marriage and decide how they should be settled. The key here is determining whether a debt is a ‘matrimonial debt’.
A matrimonial debt is generally a debt that was taken on for the joint benefit of both parties or the family. Some common examples include:
- A home mortgage for the family home.
- Renovation loans.
- A car loan for the family vehicle.
- Credit card bills for shared household expenses.
Debts that are considered personal, such as a loan taken out by one spouse for a personal business without the other’s knowledge, or debts related to a gambling habit, might not be treated as a matrimonial debt to be shared.
Who Pays Debt in Divorce?
This is the question on everyone’s mind. There isn’t a single, straightforward answer because every family’s situation is unique. The question of who pays the debt in a Divorce depends on several factors that the Court will consider.
When dividing debt in divorce, the Court looks at:
- Whose name is on the debt?
While a loan might be in one person’s name, the Court will look at its purpose. If it were for the family’s benefit, both parties might be seen as responsible.
- The purpose of the debt.
Was the loan for a family holiday, or was it to fund one person’s lavish spending? The purpose is a huge factor.
- The contributions of each party.
The Court assesses both financial contributions (like paying bills) and non-financial contributions (like caring for children and managing the household). These contributions influence the overall division of both assets and liabilities.
So, how is debt divided in divorce? The Court will typically offset the total matrimonial debt against the total matrimonial assets before distributing the remainder.
For instance, if you have a flat worth $800,000 and an outstanding mortgage of $300,000, the net value for division is $500,000. The Court then decides how to split this amount based on each spouse’s contributions.
How to Split Debt in a Divorce Sensibly
Navigating how to split debt in a divorce requires honesty and a bit of strategy. The best first step is to get a clear picture of your financial situation.
- List Everything: Sit down and make a comprehensive list of all assets and all debts. Include mortgages, car loans, student loans, credit card balances, and personal loans.
- Gather Documents: Collect statements and agreements for all debts. Knowing the exact amounts owed and the terms is essential.
- Communicate (If Possible): If you and your spouse can communicate amicably, try to agree on how the debts should be paid off. Any agreement you reach can be formalised in a consent order, which is then approved by the Court.
- Seek Legal Advice: This process can be complicated. Understanding your rights and obligations is paramount to protecting your financial future. A divorce lawyer can explain the nuances and help you present your case effectively to the Court.
Conclusion About Debt In Divorce
The process of settling your finances during a Divorce can feel overwhelming, but you do not have to do it alone. By understanding the principles the Court uses and being prepared, you can approach the situation with more confidence.
Ultimately, the goal is to reach a fair outcome that allows both you and your ex-spouse to move forward on a stable financial footing. Getting professional guidance is not a sign of conflict; it is a smart step towards a fair resolution.
For clarity and support on your journey, reach out to Tembusu Law, home to the best divorce lawyer in Singapore.
Contact us today for a free consultation!
Frequently Asked Questions About Debt In Divorce
What If The Debt Is In My Spouse’s Name Only?
Even if a debt is solely in your spouse’s name, the Court may consider it a matrimonial debt if the funds were used for the benefit of the family, such as for renovations or children’s education. The Court will look at the purpose of the loan, not just whose name is on the paperwork.
Can I Be Held Responsible For My Spouse’s Gambling Or Personal Business Debts?
Generally, you would not be held responsible for debts your spouse accumulated for their sole benefit, especially without your knowledge or consent. Debts from activities like gambling or a failing personal business are often considered personal debts and remain the responsibility of the spouse who incurred them.
What Happens To Our Joint Credit Card Debt?
Joint credit card debt is typically considered a matrimonial debt, as it is often used for shared household expenses. The outstanding balance will likely be factored into the overall division of assets and liabilities. It is wise to close joint accounts as soon as possible to prevent further debt from being accumulated.
Should We Pay Off Debts Before Filing For Divorce?
If you and your spouse can agree and have the means, paying off smaller joint debts before filing for Divorce can simplify the process. However, for larger debts like a mortgage, this is often not possible. It is best to seek legal advice before making any significant financial moves.
