Barefoot Investor Q&A: Debt liability is an issue in marriage breakdown

Erin is considering leaving her husband who has alcohol and gambling issues and is concerned about being liable for his debts.  

Dear ScottI’ve been married since 2008 – and from the start my husband has struggled with alcohol and, increasingly, gambling. He used to do it on weekends, now it’s every day. It’s taken me a long time to wake up to the fact that I need to leave. But I’m worried about whether I’ll be liable for any debts he’s racked up, or the ones after I leave.Thanks, Erin

Hey Erin,

The answer, like your relationship, is complicated.

If your debts are in joint names, the fine print on every contract says you’re ‘jointly and severally liable’ (in other words, you’re both on the hook). And if they’re secured against jointly owned assets (like your home), the same applies.

So here’s what we’re going to do:

Go to your bank and review all your accounts. Make sure you’re a signatory to any joint accounts, and if possible shut down any other accounts you can. Also, print out all your statements and mark what you’ve spent.

Then write a list of your assets and liabilities, down to the dollar, as of the day you walk out. This will mark a financial line in the sand. It’ll also allow you to track your spending after the separation (which may be taken into consideration in discussing a settlement).

All good stuff, but it won’t stop him betting your home on ‘red’.

You need to find a lawyer (go to www.moneysmart.gov.au for a list of free legal advice agencies). Take your bank statements and list of assets, and ask the lawyer how you can come to a mutual agreement with your husband; then lodge it with the courts (known as a ‘binding financial agreement’) to ensure the asset split is final. This may or may not work. Either way, you’re going to need good legal advice. Take a friend with you for support, and get them to write down everything that’s said.

I’m sorry you’re in this situation. Gambling is a horrible disease, especially if you have to live with it. Good luck!

Scott

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