Divorce and debt assignment

[malamute]

Hi,

In the financial order if the respondent is given a joint debt (e.g. a loan), and court order granted for this. how does this get sorted out - i.e. the account name (is the account name put into the name of the respondant as per the court order, the credit file for the petitioner, the lender being informed etc?

Thanks

[PlanB]

Re: Divorce and debt assignment

A divorce agreement can only specify who is supposed to pay a joint loan but the financial order doesn't override the original credit agreement signed. The divorce agreement is separate from the loan agreement. One person may be responsible for the loan in the court's opinion but not in the lender's opinion.

The lender will have approved the loan assuming both borrowers would be paying. One person may have had a better credit score than the other but the lender lent on the assumption that both would be paying, so they won't want to let one of them off the hook for liability.

So the joint loan stays the legal liability of both people regardless of a divorce settlement, although the person who is supposed to pay it can face legal trouble if they don't, but you will both face financial trouble if it isn't paid. The CRA files won't change even if you move address.

The person who is not supposed to be paying (in divorce terms) will still be entitled to see regular statements so they'll know if the payments are being met.

If that person has a squeaky clean CRA file then it may make sense to pay any missed payments to keep things safe and sound, but also go back to the divorce lawyer to get something done about the ex's failure to abide by the settlement.

The only solution would be for the person newly responsible for the debt to take out a new loan in their sole name to pay off the existing joint loan.

Plan B x

[cymruambyth]

Re: Divorce and debt assignment

There was an article in the papers in the last few days. An overdraft or loan was split with equal liability between a divorcing couple; he had cleared his portion but she hadn't and so the DCA was now chasing him as the original order was not legally binding with regard to debt.
On the plus side the DCA (Lowells I think) had decided as a gesture of good will : written it off.

[malamute]

Re: Divorce and debt assignment

This was my fear and, whilst unfortunate at least now i know. Your detailed explanation was very clear though as well - thank you.

They say that a judge orders what is fair but the conundrum is can it be fair that if a respondent has destroyed their financial circumstances since separation so couldn't refinance their share of a loan as well as shown that any and all payment commitments won't be met - that the petitioner will be at risk unless they take the whole loan.