“Debts and
Divorce Campaign.”
A New Approach To Control Debt During and After Divorce
As anyone who has ever been divorced doubtless knows, the divorce
process can leave both parties heavily in debt.
The emotional side of divorce can take its toll, but the financial
process can in fact be one of the most stressful aspects of separation,
and dividing up any debts from the marriage can leave a huge dent
in your bank balance.
Since the whole process can be costly, both in financial
and emotional terms, there has been a move towards a more amicable
approach to
sorting out the terms of a separation. With the launch of the "Debts
And Divorce Campaign", from the UK
Insolvency Helpline and Divorceaid, the self-help and support website for families going
through divorce, there is now a structured approach in dealing
with household debts.
This is welcome news as the strain of Britain's 160,000 divorces
each year is not just stressful, with almost half (45%) those surveyed
saying breaking up has caused more financial problems than bereavement
or redundancy. People who split up also use up their personal savings
as well, with 36% becoming heavily in personal debt as a result.
30% of divorcees stated that they needed professional debt counselling
and advice, while 28% found it hard to adjust to having just one
household income and 10%
had difficulty sorting out their debts and had to consider bankruptcy.
The research carried out by the UK
Insolvency Helpline in conjunction with Divorceaid has shown that the cost of divorce
can leave
couples heavily in debt and sometimes
becoming an ex also brought out the need to spend money on themselves, with 15%
saying they had utilised credit cards to purchase holidays or luxuries they would
not have bought if still married. This can be a very sore point during the divorce
process.
Only 8% of people said they had managed to control their finances
and had come to an amicable agreement on finances, even though
more than a quarter said they
wished they had. Of the 78% who ended their marriages amicably, almost all said
that their finances now needed a makeover.
On average divorcees who contacted the UK
Insolvency Helpline had £15,000
to £25,000 in unsecured debts, while half of people had debts of £2,400
to £6,000 due to the costs of setting up a new home. Many of the people
interviewed had chosen to enter into an Individual Voluntary Arrangement (IVA
) which is a softer alternative to bankruptcy and can massively reduce debt levels.
When it came to practical advice, more than half of the 320 people
questioned said they had turned to The UK Insolvency Helpline
for financial guidance after
speaking to their solicitors.
Many relied on Citizen
Advice Bureaux, some turned to friends,
others went to counsellors or used support organisations such
as Divorceaid.
Ian Richards from the UK
Insolvency Helpline said, "We have launched the “Debts
And Divorce Campaign” to try and understand our callers’ spending
patterns so that we can help them plan for the future. By using the divorceaid.co.uk
website, people should be able to keep their legal costs down as they are guided
through the whole divorce process. Christina Tait, from Divorceaid says, “This
could possibly assist some people in saving their relationship or at least bringing
it to a more peaceful and less costly closure but whatever happens, Divorceaid
aims to provide support. We will take you through emotional, child and health
issues, as well as explaining the legal and financial implications.”
Statistics - What causes debt?
- Divorce and separation - 52%
- Bereavement - 18%
- Ill Health - 15%
- Loss of work - 10%
- Disability - 5%
Case Study
Louise and William Davies recently divorced. The terms of the
divorce decree stated that William would pay the balances on
their three joint credit cards and two loan accounts, amounting
to £22,000. Months later, after William decided to go bankrupt,
all three creditors contacted Louise for payment. She referred
them to the divorce decree, insisting that she was not responsible
for the accounts. The creditors correctly stated that they were
not parties to the terms of the divorce and that Louise was still
legally responsible for paying off the couple’s joint accounts.
Louise later found out that the late payments appeared on her
credit report and as such entered into an IVA - Individual Voluntary
Arrangement. (IVA - A softer alternative to bankruptcy, which
can massively reduce debts.)
In most scenarios, the date of separation in a final judgment
or decree officially determines when you are no longer responsible
for the debts that your spouse has incurred. Make sure all joint
accounts are closed or divided when you separate. Make sure,
too, that you divide all debts and know who is responsible for
each one. Before doing so, set up an account in your name and
make sure that you qualify for credit, since sometimes your individual
credit rating can be affected if you close an account.
If you are unable to trust each other during the separation,
contact all service providers (gas, council tax, solicitors,
dentists, etc.) and inform them in writing that if any work is
being done for your spouse, you will not be responsible for the
bills.
Even if all these precautions are taken, it is still possible
that creditors might come after you seeking payment for bills
your spouse may have incurred. Thus the more accounts you can
close, the better off you are but always be guided by your solicitor.
You may well be responsible for debts your spouse runs up for
the necessities of life during the separation period. These include
housing, food, clothes, the children's expenses, and medical
expenses. The more you can agree together, the easier the separation
could be.
TOP TIPS
You may want to look closely at issues involving credit. Understanding
the different kinds of credit accounts opened during a marriage
may help illuminate the potential benefits—and pitfalls—of
each.
Whether you are married or single, you alone are responsible for
paying off the debt. The account will appear on your credit report,
and may appear on the credit report of any "authorised" user.
If you're not employed outside the home, work part-time, or have
a low-paid job, it may be difficult to demonstrate a strong financial
picture without your spouse's income. But if you open an account
in your name and are responsible, no one can negatively affect
your credit record.
No matter who handles the household bills, you and your spouse
are responsible for seeing that debts are paid. A creditor who
reports the credit history of a joint account to credit bureaux
must report it in both names
Because two people applied together for the credit, each is responsible
for the debt. This is true even if a divorce decree assigns separate
debt obligations to each spouse. Former spouses who run up bills
and don't pay them can damage their ex-partner's credit histories
on jointly held accounts.
If you're considering divorce or separation, pay special attention
to the status of your credit accounts. If you maintain joint
accounts during this time, it's important to make regular payments
so your credit record won’t suffer. As long as there's
an outstanding balance on a joint account, you and your spouse
are responsible for it.
If you divorce, you may want to close joint accounts or accounts
in which your former spouse was an authorised user. Or ask the
creditor to convert these accounts to individual accounts.
A creditor cannot close a joint account because of a change in
marital status, but can do so at the request of either spouse.
A creditor, however, does not have to change joint accounts to
individual accounts. The creditor can require you to reapply for
credit on an individual basis and then, based on your new application,
extend or deny you credit.
In the case of a mortgage or home equity loan, a lender is likely
to require refinancing to remove a spouse from the obligation.
NOTES TO EDITORS
The UK Insolvency Helpline
w: www.insolvencyhelpline.co.uk
t: 0800 074 6918
“Many people with debt problems do not know where to turn for help. The secrecy of debt often leads to further borrowing, making the problem worse. Debt affects relationships, work performance and health. The UK Insolvency Helpline offers quick access to a way out from the downward spiral of debt. The service is needed because of increasing demand for confidential and non-judgemental and debt advice. This has become difficult to obtain in recent years, particularly for those in work.
Those needing help are referred to the UK Insolvency Helpline, a national debt advisory service. They provide continued personal support to their clients, assigning each with a case officer who is readily available to help with problems or concerns that may arise. The service is completely confidential and clients will be offered a solution that best meets their individual circumstances.”
The UK Insolvency Helpline Offers
- Immediate advice to all clients
- Ensures clients understand the options open to them in
order that debt-repayment programmes are realistic and achievable
- Offers advice without asking for sensitive personal information
- Provides continued personal support and advice, assigning
each client a case officer who is available throughout the repayment
programme for help with concerns or problems that may arise
- Gives clients a specific date by which they will have cleared
their debts
- Offers a nationwide network of support with home visits arranged
in circumstances where this is felt necessary
- Employs trained money advice professionals.
Divorceaid
w: www.divorceaid.co.uk
e: office@divorceaid.co.uk
Divorce Aid
P.O.Box 6450
Oakham
LE15 9ZR
Editor: Christina Tait
Divorceaid is a new self-help and support website for families
going through divorce. Written in a comforting and easy to understand
style with original artwork and numerous quotations and poems,
it aims to reduce the conflict and distress associated with the
divorce process.
There are six sections on the easy to navigate site and each includes
a selection of articles, a Letters Page, Books section and a pop-up “Who
can help” section with direct links to numerous agencies
and helplines. Each of these has been personally tested and reviewed
so that the user is not just redirected to another site.
With experts like a psychoanalytic psychotherapist, a family G.P;
financial advisers, an entrepreneurial guru, expert family lawyers,
life coaches and the inimitable Barefoot Doctor, Divorceaid hopes
to guide families through these six areas:
>> Emotional / Child / Health / Legal/ Financial / Moving
On.
Emotional Aid – Assess whether your marriage is really over
and find support in dealing with the emotions that this entails.
Consult a counsellor face to face, by phone or email.
Child Aid – Hands on information for parents with a site
for Children and an innovative site just for Teenagers. Seeing
things through the eyes of a child is the site philosophy.
Health Aid – Looks at Mind Body and Soul issues. This contains
thought-provoking articles with ideas for coping with this change.
Legal Aid – a guide to the divorce system in England and
Wales, written in a sympathetic, non-legal manner. From finding
a qualified solicitor, how to handle him and keep costs down to
making a short term plan, overcoming obstacles such as problems
re children and reaching a settlement.
Financial Aid – looks at issues from the courts’ view,
the CSA in a nutshell, making a short term plan, the family home,
drawing up a budget, debts in conjunction with the UK Insolvency
Helpline, pensions and settlements.
Moving On – focuses on issues post divorce such as dating
again, new families, work and training and finances. The accent
here is on personal stories and the future.
“Time is a healer; spend some time with us. From distress
to recovery, you are not alone and it will get better.”
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