While most of us think about who gets the house or how pensions are divided, personal debt is another major issue that needs to be handled properly — especially if you want to walk away on fair and stable ground.
Whether it’s credit cards, car loans, or money borrowed from family, sorting out who owes what can get messy. That’s why it’s important to understand how personal debts are dealt with in divorce — and when to bring in the professionals.
What Actually Counts as Personal Debt?
Personal debt is any money you owe to another person or organisation. That might include:
- Student loans
- Credit card balances
- Mortgages or home equity loans
- Car finance
- Even informal loans from friends or family
Just because a debt is in one person’s name doesn’t mean it won’t be considered part of the overall financial picture. If your ex also benefited from the debt — for example, you used a personal loan to fund a joint holiday or renovate your home — it may be treated as matrimonial debt.
The bottom line is: If both parties gained from it, both may need to share the responsibility.
When Can It Get Difficult?
Soft Loans: The ‘Bank of Mum and Dad’ Problem
Many couples get a helping hand from family when they’re starting out — often affectionately referred to as borrowing from the “Bank of Mum and Dad.” These loans might seem casual at the time, but they can become a real challenge during a divorce. This is because soft loans like these often aren’t officially recorded or legally binding. Without proper paperwork, courts can struggle to see how that loan will be enforced — and it’s often hard to prove whether the money was provided by way of a gift or a loan.
💡 Tip: If you’re currently receiving money from friends or family, it’s a good idea to formalise it with a written Loan Agreement. Clear terms around repayment and interest can save you a lot of stress later on.
Commercial Debts: Business and Divorce Don’t Always Mix Well
If either (or both) of you own a business or have taken out loans to fund a commercial venture, these debts need to be considered too. A full list of all business-related debts — including lenders, balances, and terms — should be shared early in the process.
Deciding who takes responsibility for each debt will depend on how the money was used and who benefited from it. Sometimes, it’s straightforward. Often, it’s not — and that’s when your solicitor or a mediator can step in to negotiate a fair arrangement.
In some cases, if no agreement can be reached, you might need to apply to the court for a Financial Remedy Order to resolve the issue but your divorce solicitor will be able to advise you whether it is appropriate.
Be Open, Be Honest — and Get Advice Early
One of the best ways to avoid unnecessary tension (and expense) is to be upfront. Full financial disclosure — including all debts, both personal and shared — helps both parties and their solicitors work towards a fair solution.
If you’re going through a separation and you’re unsure how your debts (or your partner’s) will be treated, don’t wait. Get advice early — especially if those debts are significant.
Need Expert Support?
The Family Law team at Ward Hadaway isn’t just here for divorce. We’re here to help with everything from relationship breakdowns to financial disputes — with empathy, clarity and real solutions. Get in touch with us today.
