Dealing with Debt in a Break Up

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When a relationship breaks down and two people who have relied on each other part ways, adjusting to a new lifestyle can be challenging. Here are several ways to protect yourself financially both during the relationship and after it ends.

When things are going good, it seems ridiculous to make plans for a financial escape. But it’s better to be prepared than to be left stranded and stressed. When you enter a relationship with someone, your lives become entwined and you take on a share of their responsibilities and therefore, a share of their debt. You also enter into new debt with your partner. Maybe you buy a house together, go on holiday or have kids. You come to rely on your partner and plan your future around having their emotional, physical and financial support. So if that support network should go, you need to be able to survive on your own.

In your relationship, there are things you can do to safeguard yourself and your partner to be able to cope financially without each other. You don’t have to hide money away in a secret account in case you ever leave, you should be up front and honest about what you are doing and get your partner involved.

Break ups also impacts on businesses, whether you’re the owner or an employee. The situation is worsened where a couple have worked together as colleagues. A business can easily fall into financial distress or insolvency. However, first and foremost, it’s critical that you look after your own wellbeing and health. Seeking specialist medical advice should be the first point of call because business failure risk is highest when key decision making staff are absent.

Keep Track of Things

In many relationships, one person will take over as the financial planner – the person who knows all the money coming in, all the bills and expenses that need to be paid and where all the savings are. Often, the other person in the relationship will take a back seat and trust the financial planner to take care of all the bills and decisions. 

In a breakup, the person who took a backseat to the finances in the relationship is often left clueless. They don’t know what bills they must pay, what expenses are due, what savings they have, and their debt can often spiral out of control. To avoid the post-breakup financial fog, make sure you are both involved in the finances. You can do this by writing down your household budget, outlining things such as: 

  • groceries
  • bills such as electricity, water, phone etc.
  • rent/ mortgage repayments
  • insurances such as car, health etc.
  • car repayments
  • debt repayments
  • pet costs

Have Savings

No matter what stage you are at in life, you should have some savings to fall back on in an emergency. When you are in a relationship you can maintain individual savings accounts or have a savings account together. If things go south, you will both have some money to help you find your feet on your own until you adjust to your new single lifestyle.

Proceed with Caution

We often come across people who trusted their significant other with a credit card or personal loan, not realising they were racking up thousands of dollars in gambling debt. Trust is important in a relationship, and you should be able to trust your partner in all things, but it is wise to keep an eye on your accounts. If you or your partner are having trouble with gambling, you can seek help at the Gambling Help Online website.

If Your Relationship Ends

If your relationship breaks down, you need to be proactive about sorting out your financial situation. Often, that means keeping in touch with your ex to make sure everything is settled. While this can be difficult to think about in a time of emotional and mental stress, you can seek help from a family member, lawyer or financial counsellor. The Association for Small Business and Family Enterprise (ASBFEO) offer dispute resolution services that include practical logical steps.

Digital Security

Maintaining digital security is crucial both during and after a relationship. It’s important that both partners have fair access to shared online banking, credit accounts, and digital services. After a breakup, discuss a plan to either close shared accounts or update them into individual accounts. If you decide to maintain separate access, change the passwords together and agree on the terms of who manages which accounts. This ensures that both parties are protected, and neither is unfairly locked out of necessary resources. Regular updates to passwords and account settings can help prevent unauthorised access and protect personal information as each person moves forward independently. 

Mortgage Repayments

If you purchased a property in your relationship, you will need to deal with the repayments. There are several situations you can find yourself in after a breakup including:

  • One of you has moved out and have stopped making repayments
  • One of your has moved out but you are both maintaining the repayments
  • You are discussing selling the house
  • One of you has offered to take over the mortgage from the other by purchasing their share.

Although speaking to your former partner might be the last thing you want to do, keeping an open line of communication is very important until you sort out the mortgage.

Even if you no longer live at the property, you are legally responsible to make the repayments. If your former partner has agreed to take over the repayments in full, you need to get your name removed from the loan. The reason for this is because if your ex defaults on the repayments or falls behind, your credit file will be affected too. The bank could also legally pursue you for the full repayment.

Similarly, if you have stayed in the house and need to keep up the repayments, you should try to take over the mortgage, even if you need to ask a family member or friend to help you refinance. If neither of you can afford the repayments on your own, you should sell the property so neither of you has to struggle with the debt.

Joint Debts

Much like a mortgage, if your name is on a joint debt, you are legally responsible to make the repayments. If your former partner defaults on their repayments, the bank might chase you to cover the costs. If you have any joint debts with your ex, you should speak to the bank about refinancing the loan into either your name or your ex partners name.

This way you won’t have to keep tabs on what your ex is doing or worry about the joint debts coming back to haunt you.

Child Support Payments

Breaking up is hard. Breaking up when kids are involved is even harder. Unlike other debts, Child Support Payments cannot be included in a debt relief solution like a Part 9 Debt Agreement or Bankruptcy.

If child support is not affordable for you anymore, you can visit the Child Support Agency to have your repayment amount reviewed. Alternatively, if your ex-partner has stopped paying their Child Support, you should visit the Child Support Agency and they can follow up on the payments owed.

More Help with Debts

If a relationship breakdown has left you with a massive debt problem, we can help. The experienced staff at Revive Financial will listen to your situation and advise you on the best way to proceed. We can tailor a debt relief solution to your specific circumstances and help you get back on your feet. You don’t have to struggle through debt alone, expert help is only a phone call away. Enquire with us online and we’ll call you back or you can call us on 1800 534 534.

Jarvis Archer BCom, CA, RITP, CTA, RTM® (ASIC Registered Liquidator)

Revive Financial: Head of Business Restructuring & Insolvency
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Jarvis Archer
Certified Restructuring & Turnaround Manager ~ RTM®
Revive Financial
Queensland, National
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