If you are married or in a cohabiting relationship, your finances will be interwoven in various ways with those of your partner. You almost certainly agreed to share household expenses in various ways when you first moved in together. Maybe you even have a joint bank account.
Every couple comes to their own arrangements according to their individual circumstances. Sometimes these arrangements might be official ones for the outside world – for example, only one party in a marriage might sign the dotted line in a loan agreement– but in most cases they’re informal agreements made between the couple according to what seems best and fairest in the circumstances.
But estrangement, separation, and divorce can throw these day-to-day fundamentals into a state of flux and uncertainty. It can be a stressful time if you don’t know what can and should happen.
Understanding interim financial support
During the divorce process, especially when one party is financially disadvantaged, interim financial support can be crucial. Known as “maintenance pending suit,” this court-ordered support ensures that the financially weaker spouse can maintain a reasonable standard of living until the final settlement is reached.
It is important to note that maintenance pending suit is assessed based on immediate needs rather than long-term standards. The court considers income disparity, child-related costs, mortgage or rent obligations, and whether either spouse has access to joint funds. To apply, a detailed financial statement must be submitted (Form E), outlining income, expenses, assets, and liabilities.
During the divorce, who pays the joint bills such as the mortgage or utilities?
One of the most important things to note is that separation or divorce frees neither party from any financial obligations they held beforehand – the person responsible for paying the mortgage, for example, will continue to be responsible, even if they are the ones to move out of the home. This responsibility can only end if and when alternative arrangements are made with the agreement of the mortgage provider – for example, one party buying the other out, or more commonly, the property being sold and the proceeds divided so each party can set up a new household elsewhere.
The same principle applies to other household outgoings such as council tax and the electricity bill: whoever paid those bills or made those payments should continue to so unless and until other financial arrangements are agreed, either directly or as part of the divorce settlement.
If you jointly made particular payments, you should both continue to do so until new arrangements are agreed. At that point, things will most likely change. If one party remains in the former family home, for example, a family court will probably expect them to take on full responsibility for the council tax payments and electricity bills if they can now afford to do so following a financial settlement with their ex. The primary purpose of a divorce settlement is, after all, to separate the finances of each party, ensuring that both parties leave the relationship with as much as they need to lead separate lives.
I have joint debts with my partner – how are those handled?
It is pretty common for couples to take out joint loans – for cars, sofas, home refurbishments, the list goes on. Just like mortgages, the repayment of any joint debts must continue after divorce or separation. Your personal life is of no concern to lenders after all. But of course, you now wish to lead separate lives and an important step toward doing so will be disentangling your finances.
The first thing to do is to talk to your soon-to-be-ex-partner and try to come to an agreement about the best and quickest way to settle these debts – by selling that car or sofa perhaps. But what if you can’t agree? Maybe your ex denies that they’re responsible for a particular debt – or you do the same. Then responsibility for those joint debts will have to be formally ruled on and incorporated into the divorce settlement with the help of a family solicitor or judge.
Protecting your credit and financial standing
Divorce can have unintended consequences on your credit score, especially if you have joint accounts, credit cards, or loans. To safeguard your financial standing:
- Disassociate financially: Request a financial disassociation from credit reference agencies to separate your credit files.
- Close or amend joint accounts: Amend or close joint accounts to prevent either party from accruing debt under your name.
- Monitor your credit report: Regularly check your credit report for discrepancies or unauthorised activities.
You should also notify lenders and utility companies of the separation. If you’re not the account holder but rely on services like energy or broadband, ensure your access and obligations are clearly defined.
Addressing informal loans and family contributions
Informal loans from family or friends can complicate divorce settlements. While these are not formal debts, the court may consider them if there is sufficient evidence of their existence and terms.
The court will scrutinise whether such contributions were genuine loans or informal gifts. If a parent provided funds for a house deposit, was it a loan with an expectation of repayment, or a gift to the couple? Having written agreements or bank records can support your claim.
In England and Wales, family courts operate on fairness, not strict contractual enforcement, meaning informal loans can easily be disputed without clear documentation.
Do children affect who pays the bills during a divorce?
The best interests of children are a primary concern for the family courts during a divorce. Divorcing parents will be expected to pay the bills necessary to ensure their children’s welfare during the divorce – mortgage payments, for example, household bills or school fees. Formal child support obligations will be included in the eventual settlement.
Joint ownership and property use
If you jointly own a property, you may wonder whether you must sell it immediately or who gets to stay. The court typically aims to ensure stability for any children involved. Often, one party may remain in the home until children reach a certain age, with a deferred sale agreement (known as a Mesher Order). Alternatively, a Martin Order allows one spouse to remain indefinitely if it’s financially viable. These are important legal tools when negotiating property use post-separation.
My ex isn’t paying their fair share – what can I do?
But what if they don’t pay their fair share? What if you are in financial difficulties because your ex is refusing to pay up? Then, with the aid of a solicitor such as Major family Law, it may be necessary to ask the family courts to intervene. Courts can, for example, order temporary maintenance payments prior to a formal divorce settlement. This is called ‘maintenance pending suit’. Ask an expert family solicitor about the options open to you.
Seeking professional financial advice
Engaging with a financial advisor who specialises in divorce can offer invaluable insights. They can assist in:
- Asset valuation: Providing accurate valuations of shared assets, especially complex ones like businesses or investment portfolios.
- Budgeting: Helping you understand your post-divorce financial needs and avoid over- or underestimating your lifestyle costs.
- Tax implications: Advising on potential tax consequences of asset transfers, especially relating to Capital Gains Tax (CGT).
Transferring property or investments as part of a divorce can have unintended tax liabilities. For example, CGT applies to gains on asset transfers made after the tax year of separation unless covered by a court order. Understanding these timelines is critical.
Emotional well-being and financial decisions
The emotional strain of divorce can cloud judgment, leading to decisions that may not be in your best financial interest. It is essential to:
- Seek support: Engage with therapists or support groups to manage emotional stress.
- Take time: Avoid making hasty financial decisions; allow yourself time to consider options thoroughly.
- Stay informed: Educate yourself about your rights and the financial implications of your decisions.
Many individuals, especially primary carers, feel pressure to “keep the house” at all costs, even when it’s unaffordable. It is important to assess long-term sustainability and avoid sacrificing pension or income sources to retain property that may become a financial burden.
Legal fees and litigation costs
Legal costs can accumulate quickly, especially in contested disputes over finances and children. Both parties are generally expected to cover their own legal fees, but in cases of misconduct (e.g., hiding assets), courts may order one party to contribute to the other’s costs.
Consider alternative dispute resolution methods such as mediation or collaborative law, which can be more cost-effective than going to court. Legal aid is limited but still available in cases involving domestic abuse or child protection issues.
Considering postnuptial agreements
While prenuptial agreements are signed before marriage, postnuptial agreements are made after tying the knot. These agreements can outline the division of assets and financial responsibilities in the event of a divorce. This can include who pays what pending the outcome of the financial settlement.
In addition, a postnup can be particularly useful if there’s a change in financial circumstances, such as inheritance, a business start-up, or career change during the marriage. Although not legally binding in the UK, postnups are persuasive if both parties entered the agreement freely, with independent legal advice and full disclosure.
They are also helpful in second marriages or blended families to ensure financial protection for children from previous relationships.
Important considerations
It is essential during the intervening period between separation and the financial settlement to communicate with your ex, negotiate, and if necessary seek legal advice to help you reach a fair and mutually agreeable arrangement in relation to paying bills. Here are our tips for continuing to cover essential payments:
- Child care costs: If you have children, you will need to include childcare costs in your budget and arrange for one party to make child maintenance payments.
- Named responsibility: If the mortgage or rent is in one person’s name, that person is usually responsible for paying it, regardless of whether they are living in the property.
- Financial support: One party may need to provide financial support to the other, which should be agreed upon and documented.
- Shared debts: If debts were shared before separation, both parties remain responsible for the whole amount even if one party stops paying
- Legal consequences of non-payment: Failure to pay bills can lead to late fees, legal action, and potentially even repossession of the family home
- Protecting credit scores: Failing behind on payments can negatively impact credit scores.
Divorce is a multifaceted process that extends beyond dividing up bills or assets. By understanding interim support options, the importance of pensions, protecting your credit, addressing informal loans, considering postnuptial agreements, seeking professional advice, and maintaining emotional well-being, you can navigate the financial complexities more effectively.
Being proactive and informed empowers you to make decisions that secure your financial future post-divorce. The legal framework provides tools and protections, but preparation and clarity are key.
If you are concerned about your bills or your finances relating to divorce, contact us to request a free 45 minute consultation with one or our specialist solicitors.