Consciously uncoupling the cash

We shed light on the murky reality of sharing debt with your ex

Jointly held debts need servicing no matter what a couple are going through (Getty)

It’s never easy to cut the ties of a failed relationship. There are shared friends, sometimes shared children, shared belongings and, increasingly, shared debts and other financial obligations.

But working out who gets to keep the house, how to split any financial assets and – with even more potential for serious arguments – who gets custody of any debts is a combustible topic that few are desperate to broach. That's despite new research from for-profit debt management business the Debt Advisory Centre, which shows that two-thirds of people who split up with a partner in the past year are still financially linked to them through a mortgage or joint tenancy agreement. Almost a fifth of people held a credit card or loan with their ex and a similar number had a joint bank account.

Resolving these shared commitments can be difficult and leave former partners at risk of a financial vendetta. Whatever else you consciously uncouple – finances should be a priority.

Difficult discussions

Sally Leaman, family law solicitor at Gorvins Solicitors, has seen many couples struggle to resolve their finances amicably. She says: “A couple’s financial bonds can be so enmeshed that it can be extremely difficult and complicated to uncouple their finances even where they have both moved on emotionally.

“In effect you are splitting one ‘financial cake’ to meet all the needs of what are now two separate households and that can be hard to manage. If you add into the mix the emotional distress and acrimony that often follows a break up, this only increases the challenge.”

However, it’s a challenge that needs to be dealt with early on, because while there is still a financial connection one former partner can continue withdrawing funds and spending money on any shared credit products – and the other will remain jointly liable for those debts. That’s why it’s so important to act fast and to understand what needs to be done.

James Jones, head of consumer affairs at Experian, warns this may prove complicated: “How difficult this proves to be depends on how close your association is with your ex-partner. When a relationship ends, details of all associations stay on your credit report unless you inform the relevant organisations (such as Experian and other credit reference agencies) that they need removing. This requires that you no longer have any financial link with the other person.

“Updating records isn’t a painful process, but depending on the nature of your financial arrangements – for example, if a mortgage is in both your names – then it can be a time-consuming process, not least because it requires the agreement of both former partners.”

Conversations about who will take over debts must be tackled early on (iStock)

’Til debt do us part

One aspect of a separation that’s perhaps more likely to cause a fight is the issue of shared debt and who will claim responsibility for it. Both parties probably want to move on, yet if they disagree about how to manage any debt in both their names then it can hang over them.

Research from the comparison website uSwitch has shown that more than two million British people have ended up with debt on a shared credit card once a relationship has ended. Unfortunately, few people plan for what they will do if they separate and that can leave them in an unexpectedly difficult position.

Jamie Smith-Thompson, managing director at pension advice specialist Portafina, says: “In a recent survey we found that 92 per cent of people are financially unprepared for a relationship break-up, so it’s no surprise that joint finances can often get in the way of a clean split when couples separate.

“Some situations are easier than others. For example, if one person has their own loan for their car, that remains their responsibility. If both people paid an equal share of a house deposit and pay half of the mortgage every month, it’s a simple case of selling the house and splitting any return or profit down the middle. A joint account can often be split 50/50 and then closed.

“Joint loans, investments and one person paying more towards a mortgage can make things more problematic, though, and there isn’t a one-size-fits-all recommendation on resolving this sort of situation. In relationships where an agreement can’t be reached, it’s worth talking to a financial or legal adviser. They can look at any contracts or terms of agreements and advise on a fair way for the couple to move on, which could hopefully mean that very expensive court and solicitor fees can be avoided.”

However, to avoid damaging either party’s credit rating it’s vital to understand that jointly held debts will need servicing, no matter what the couple are going through together.

Claire O’Flinn of Keystone Law comments: “Where financial products are in the joint-names of the parties, they will continue to be jointly responsible for those debts… As an interim measure, it can be very important for a couple to decide who will continue to be responsible for debts and loans and whether certain financial products need to be taken on by one partner and for the other to be released from their obligation. For example, whether the balance of a joint account should be divided equally and the account closed.”

If discussing it is proving hard, it’s important to stop the situation becoming any worse as soon as possible. uSwitch’s money specialist Tashema Jackson urges a rapid response to an ended relationship.

She says: “If you’re one of the unlucky ones whose ex has left you with unpaid debt, contact your bank and freeze the account. Even if you and your partner are no longer on speaking terms this means no further activity can take place and each account holder will have to agree with the bank how to settle the account. If no agreement is possible you should first complain to your bank and then escalate to the Financial Ombudsman if necessary.”

Freezing financial ties

To successfully separate finances requires each former partner to fully understand how they are linked and, after a lengthy relationship that has included a number of shared commitments and assets, that can be difficult.

Mr Jones explains the process of working out what you need to get out of. “First, check what joint finances you have. The best way to do this is to obtain a copy of your credit report, which can contain information about credit accounts in your own name as well as any that are jointly-held. You won’t see any financial information pertaining to your partner, but you could see which accounts you hold jointly.

“Then you need to contact your lenders (or any company your joint accounts are with, such as mobile phone provider) and ask them to change your records. This isn’t always a simple process: one of you might have to sign over the mortgage to the other, for example. Or you might have to pay off one loan and apply for a new one. It’s not uncommon to find that ex-partners owe each other money.”

Even once all financial commitments are divvied up, there’s still an important final stage. Just as you tell friends and family that a relationship is over, you also need to declare your separation to future lenders and financial providers.

Mr Jones concludes: “Then, once all financial ties have been severed you need to ask each of the three credit reference agencies for a ‘disassociation’, which is the name given to the process of breaking the link on your credit reports. In some instances, if the only remaining financial link between two people is a joint mortgage and they have been living apart for six months, Experian may still be able to break the credit report link for them.”

When a relationship ends, people tell their loved ones, friends and even Facebook. But maybe it’s more important to ring the bank first.

Further information and guidance is available via the Money Advice Service (moneyadviceservice.org.uk), including:

• How to sort your finances out when co-habitors separate

• Sorting out joint finances when you are with an ex-partner

• Protecting rights to your home when you separate