Our Voice

THE LEGAL RAMIFICATIONS OF PARTNERSHIP RELATED DEBT

The statistics related to Australian couples who decide to end their marriages paint a stark picture of the potential compounding of partnership related debt throughout life. Six percent of marriages separate within the first year of marriage Thirty three percent separate within the first five years of their marriage, and twenty two percent separate within five to nine years of marriage. The remaining fifty nine per cent separate after 10 years.

During their relationship, many couples buy a home together (or sign a mortgage together) and when they separate it is not just the asset they share, but also the mortgage related debt. A mortgage is a shared debt, just as the house is a shared asset. Even if the debts are in only one name, if the debt is to support the family – such as a personal loan to buy a car or furniture – then it’s a shared debt.

A mortgage stands out as an obvious shared debt, but it is the hidden sexually transmitted debt that often catches people by surprise when relationships break down. Did you know that women are more likely to get caught out by an ex-husband who doesn’t pay the shared utility bills? A study done by Equifax, an Australian supplier of credit references, credit reports and Australian company reports, says 58% of utility bills (gas, electricity, water) are in the woman’s name. This isn’t a problem if all the bills are paid off and the account is terminated once you separate, but if that’s not the case, even once everything’s settled, the default will go on your credit report as a black mark against you.

It doesn’t get much better for men: 55% of loan defaults are by men, but if you’re their partner and have co-signed on the mortgage or you took out a contract for a mobile phone for them then, you will be sharing in the reality of having a financial institution chasing you for payments.

HOW TO PROTECT YOURSELF AGAINST SEXUALLY TRANSMITTED DEBT

As much as is possible, you need to have open communication about finances with your partner about your joint financial position. One of the most challenging aspects of partnership related debt is that it usually takes people by surprise. Participate equally in your financial situation, rather than allowing the other person to do it all, and understand what assets and debts you have. Never (ever) sign anything that you don’t understand or that hasn’t been explained properly to you. Having a comprehensive understanding of your financial position as a couple will help to negate sexually transmitted debt, but it’s also what you do after you separate that will help to protect you. If you have joint accounts with your partner, it’s best to close them once you’re separated and have your own account with your own income going into it.

Ignorance is not bliss, and in fact it is absolutely not your friend, not during your relationship, and definitely not if it breaks down. Here are some recommendations about how to ensure that you are fully aware of the financial position you and your partner share, as well as ways in which to make fully informed, conscious decisions that will help you avoid partner-related debt:

• Be extremely careful of the following :

  • Being a guarantor on a loan for your partner for any of the following;

    • Business,

    • Mobile phones,

    • Business assets.

  • Opening joint accounts (unless you keep your eyes on them on a regular basis and you know what’s coming in and going out),

  • Allow secondary use of your credit card (unless you are lucidly clear of your obligations if such things fail and you’re willing to bear the consequences).

• Ensure your utilities are in your joint names when you set up house:

  • If you split up and move out make sure the gas, water, electricity, are terminated if your name is on the bills (otherwise you will be responsible for paying ALL of them yourself).

• If you and your partner have a joint account and/or mortgage, advise the bank, and get advice on what you can do to ensure you are not exposed to more debt risk than you can handle if the relationship breaks down and things become acrimonious.

• Speak with a lawyer about a property division in the event of a relationship breakdown

• If you don’t understand the implications of signing any financial documents, ensure that you get advice that makes you feel comfortable about what you’re committing to.

THE IMPORTANCE OF COMMUNICATION IN YOUR RELATIONSHIP

Talking to your partner about money is important, whether you have similar or different spending and saving styles. Finances are often a touchy or taboo subject that don’t get brought out into the light of day early enough in a relationship.Love gives us rose coloured glasses, and many couple are so starry-eyed when they get married that they haven’t done the necessary due-diligence to understand their partner’s financial position and what each party will inherit when the partnership is legalised, either through marriage or by virtue of de-facto laws.Ultimately, a good relationship is a relationship in which both individuals can talk openly and honestly and make fully informed joint decisions based on full disclosure. If you’re in a partnership, having regular conversations about the following will be a good litmus test of your relationship: 

• Relationship goals: Work out your relationship goals with your partner. Consider what goals you share: is marriage, buying a home or having a baby on the horizon?

• Current financial situation: Take stock of your income and expenses, assets and debts and your credit rating. Start thinking about ways you may be able to reduce spending so you can save for your goals, and how you can reduce any debts faster.

• Attitudes to spending and saving: Are you a spender or saver? What about your partner? Your background and experiences will influence how you think about money. Understanding how your partner approaches financial matters will make it easier to create a money plan that suits you both. Try to find common ground so that you are working together.

• The financial controller: Who will handle the finances? Will one person look after household expenses, mortgage and savings, or will you share the responsibility? Make sure you're both happy with the decision.

Improving your levels of financial literacy and ensuring that you are fully aware of both the debts and assets your share with your partner. Your level of awareness about your joint financial position forms the foundation for your level of resilience if the worst ever happens. Being aware gives you choices and greater degrees of freedom if life ever throws you a curve ball and you face the reality of having to de-couple and unravel joint finances with your ex-partner.

If you are inspired and would like to join the revolutionary movement that Imalia is creating, you can request to join our Facebook group The Wolfpack, to share ideas and learn from other like-minded women.