How to split your debt when you get divorced

Going through a divorce will always be difficult. Dealing with the additional pressure of outstanding debt makes the process even worse.

Working out how to split your debt can be very tricky. We have outlined the main issues you should bear in mind, and how the debt division might best be achieved.

Tip: It’s never too late to have your debt consolidated into a single loan. Find out more here.

It all depends on your matrimonial contract

According to Stella Pickard, who has a background in law and is the CEO and co-founder of Quickwill, legally speaking, the division of your debt depends on your matrimonial contract.

The most common marriage types or contracts are as follows:

• Married in community of property: If you get married in South Africa without an antenuptial contract, this is the regime that will automatically apply. The effect of this marriage type is that all assets and all liabilities of the couple are joint, in equal shares. This means that your debts get paid from the total asset value of the estate, and whatever remains is split up 50-50.
• Married out of community of property, no accrual: This means that each party has their own assets and liabilities, as if they were not married. So, if you go your own way, you keep your assets and your debts and there is no split.
• Married out of community of property, with accrual: If you are married according to this regime, it means that everything you owned and owed before you were married, remains your sole responsibility. Assets and debts that you accrued during your marriage will be dealt with by adding all your, and your spouse’s, assets together, paying the liabilities from that and then dividing the assets equally between you.

READ MORE: Marriage and Money: Notes for couples in customary marriage

Tips on how to divide your debt

While the above principles govern the split of debt, there are a couple of general points to also keep in mind.

According to Reagan Mitchell, director of WealthyMe, a marriage that ends in divorce can be a messy affair. When parties don’t agree, it can lead to increased legal costs and hurt family members.

“The best way to split the debt is to start with the asset division. You take the car plus the debt on that car. You take the house plus the debt on the house. It’s most important to reach an amicable agreement on the division of the estate as soon as possible,” says Mitchell.

He adds that people can make irrational decisions. The best course of action is to seek legal assistance.  Highly-charged emotions are best removed from the process to enable a fair and logical asset split.

A debt counsellor can also assist you and your soon-to-be ex. Get your debt consolidated.