Debts to disclose during separation

Debts during separation should be disclosed with the borrower, balance, purpose and repayment terms clearly identified. An agreement between spouses does not automatically release either person from a lender’s rights or a guarantee in England and Wales. ^[1]

Create a liability schedule with named borrowers For each debt, record the lender, borrowers, outstanding balance, repayment, security and statement date. Distinguish a personal credit card, joint loan, mortgage, business guarantee and money said to be owed to relatives. Do not deduct a debt from an asset schedule without showing what it is.

Keep evidence of how the borrowing arose and whether payments are current. A balance used for household expenses and a disputed personal liability may raise different questions in negotiations, but both should be described accurately. If a family loan has no written agreement, explain the available evidence rather than creating retrospective paperwork.

Separate settlement allocation from the creditor's rights An agreement that one spouse will pay a debt does not automatically release the other borrower. Ask what lender consent, repayment or refinancing is needed and what happens if the promised payer defaults. Avoid stopping a joint payment merely to demonstrate that separation has occurred.

Use Debts and guarantees in a divorce settlement for guarantees and settlement terms. Through Divorce application support enquiry, identify the main liabilities and any imminent arrears or enforcement issue. Ask for the scope needed to assess both the family allocation and the creditor position. Keep account numbers for secure document exchange; the first enquiry only needs the nature and urgency of the problem.

Start with the borrower named in the agreement

For each liability, identify the creditor, account holder, agreement date and current balance. A debt used for family spending is not necessarily a joint borrowing contract, and a card held by an additional cardholder may have a different liability structure from a joint loan. Check the agreement and statements rather than assuming responsibility from who normally made the payments. Record security, such as a charge over property, separately from the balance itself.

Include overdrafts, credit cards, personal loans, tax liabilities, hire purchase and borrowing from relatives where relevant. If an amount is disputed, list it with the basis of the dispute instead of omitting it. Distinguish a balance already due from a possible future obligation under a guarantee. The inventory should reveal the whole position so the adviser can ask the right questions; it should not silently adopt one spouse's view of which debts ought to count.

Explain the purpose without rewriting the borrowing history

Record what the money appears to have funded and the evidence supporting that account. A loan may have paid for a kitchen, business costs and personal spending at different times. Where bank statements allow the use to be traced, identify the relevant entries. Where the purpose is remembered but not documented, say so. Avoid replacing a mixed history with a simple label such as “his debt” or “house debt” when the underlying facts are more complicated.

Consider a credit card in one spouse's name that was used for household purchases and later for separate living costs. The contractual borrower and the financial argument about allocation are different questions. Show the statement dates and the spending periods to the adviser. Do not assume that every transaction before separation is shared or every transaction afterwards is irrelevant. The chronology provides evidence for assessment without pretending that a spreadsheet label decides the legal result.

Identify the payments that cannot wait for settlement

Add minimum payments, interest terms, arrears and upcoming enforcement dates to the schedule. The first practical priority may be preventing a missed secured payment or responding to a creditor notice, while the wider division is still being negotiated. Give the adviser the notice itself and explain what payment is affordable. A proposed agreement between spouses should not be treated as permission to ignore a creditor or stop an existing payment without understanding the consequences.

If both people contribute, record the amount actually received and the account from which the creditor was paid. A transfer between spouses is not necessarily proof that the loan instalment reached the lender. Keep those two movements distinguishable. Where a payment arrangement is being discussed with a creditor, note who has authority to speak and obtain the resulting terms in writing. Do not rely on a family promise that the creditor has not accepted.

Reconcile balances at a common point in time

Compare balances using a stated date and explain later changes. One statement may predate a large repayment while another includes new interest or fees. Adding them without adjustment can overstate the total. Preserve the original statements and show any reconciliation separately, with enough detail to reproduce it. If a debt has been refinanced, link the old account closure to the new borrowing so both are not counted as current liabilities.

Finish the schedule with three unresolved categories: missing agreements, disputed amounts and debts needing an immediate response. This makes a consultation more useful than a single total with no source documents. When a financial proposal eventually allocates responsibility, ask what further protection or creditor action is needed. A settlement between spouses and release from a borrowing agreement are different events, and the record should make clear which has actually happened rather than assuming one follows automatically from the other.