Under the Family Law Act 1975 (Cth), debts are treated in the same way as assets in a property settlement. This means that both partners may be responsible for debts, even if only one incurred them. The Federal Circuit and Family Court of Australia (FCFCOA) considers various factors before deciding how debts are divided after separation.

Who is Responsible for Debts After Separation?

The court considers the following when determining who must pay the debts:

✔️ Who incurred the debt? – Was it taken out by one person or both parties?
✔️ Was the debt for joint benefit? – If both partners benefited (e.g., a mortgage or household loan), responsibility may be shared.
✔️ Who has the capacity to repay? – The court assesses each person’s financial situation.
✔️ Are the debts in joint or sole names? – Even if a debt is in one partner’s name, it may still be considered a joint liability in family law.

💡 Important: Creditors (banks, lenders) do not have to follow family court decisions. If a loan is in both names, the bank may still pursue either party for full repayment, regardless of what the court decides.

How the Court Divides Debts in a Property Settlement

The court does not automatically split debts 50/50. Instead, it looks at:

📊 Financial contributions – Who contributed more to the relationship financially?
🏠 Who is keeping certain assets? – If one person is keeping the house, they may also take on the mortgage.
💰 Capacity to repay – The court tries to ensure fairness, so if one person has a significantly lower income, they may receive fewer debt obligations.

🔹 Example: If one partner ran up a credit card debt for gambling or personal luxury expenses, the court may rule that they alone should repay it.

What If Your Ex-Partner Is Incurring New Debts After Separation?

🚨 If your ex-partner continues to create debts in their name, you are not automatically liable for those debts unless:

• Your name is on the account or loan.
• You acted as a guarantor.
• The debt was incurred for a joint asset (e.g., mortgage, business).

💡 Be Aware: If your ex is recklessly taking on new debts and your name is still linked, you should take immediate action to protect yourself.

How to Protect Yourself from Debt Issues After Separation

✅ Close Joint Accounts and Credit Cards – Cancel any joint credit cards or remove your name from accounts to prevent further debt accumulation.
✅ Notify Your Lenders and Banks – Inform creditors of the separation so they are aware of your financial situation.
✅ Get a Court Order for Debt Responsibility – If necessary, seek a court order to divide debt responsibility fairly.
✅ Monitor Your Credit Report – Regularly check your credit history to ensure no unauthorized debts are taken in your name.
✅ Apply for a Caveat on Joint Property – If there is a property involved, a caveat can prevent your ex-partner from increasing the mortgage or selling the property without your consent.

💡 Tip: If you are worried about being liable for debts, consider applying for an injunction to prevent your ex-partner from borrowing more money under joint accounts.

What Happens If One Party Refuses to Pay Their Share of Debt?

If your ex-partner fails to pay a debt assigned to them, you may:
🔹 Request the court to enforce the order.
🔹 Negotiate with the lender to restructure or refinance the debt.
🔹 Take legal action if your financial situation is at risk.

⚠️ Be Aware: If your name is on the loan, creditors may pursue you for full repayment, even if the court orders your ex to pay.

Key Takeaways

✔️ Debts are part of the property settlement and are divided based on fairness, not just ownership.
✔️ Even if a debt is in one partner’s name, both may still be responsible if it benefited the relationship.
✔️ Creditors are not bound by family court decisions—if your name is on a loan, you may still be liable.
✔️ Take steps to protect yourself by closing accounts, monitoring finances, and getting legal advice if needed.