Joint Debts After Divorce: Why Refinancing Matters
~ Not legal advice~ Just great information.
When you separate, dividing assets is only half the picture when it comes to finances; the other half is debt.
Divorce Doesn’t Erase Your Name from a Loan
If your name is on a loan, mortgage, or credit product, be aware that your liability can continue post-divorce, although the nature of that liability depends on the type of agreement. For example:
Joint borrowers: Most joint loans (like mortgages or car loans) make each borrower jointly and severally liable. This means the lender can pursue either of you for the entire balance, not just your “half.”
Guarantors: If you’ve guaranteed a loan, you’re liable the main borrower (e.g. your ex) defaults, and that guarantee still stands post divorce until the lender formally releases you.
Authorised users or secondary cardholders: You generally aren’t legally liable for the debt itself, but the account can still affect your credit file until it’s closed or your name is removed. It’s recommended that you check the specific terms that apply to your authorised / secondary card use.
Even if the Family Court orders one person to take over a debt, that order only binds the two of you. It doesn’t change the contract you and your ex have with the lender. The lender can still recover the full amount from any borrower or guarantor named on it.
Protecting Yourself While You Wait for Settlement
Before a property settlement is finalised, you typically can’t remove your name from a joint loan without appropriate consent.
Where both names are on the credit contract, the lender is unlikely to release either borrower unless both parties agree and the lender consents, usually through refinancing into one person’s name.
In the meantime, you can:
Notify lenders in writing that you’ve separated and ask them to require both signatures for redraws or new borrowing.
Monitor joint accounts and keep up minimum payments to protect your credit score.
Check your credit report with providers like Equifax or illion to ensure accounts are being managed properly.
Get legal advice early if you’re concerned for any reason, such as that your ex may stop paying or use shared credit.
After Settlement
Once your property division is agreed or approved it is typically prudent to:
Refinance loans into one name (subject to lender approval).
Close or transfer joint credit cards and accounts.
Get written confirmation from each lender that your liability has ended or that the account has been finalised.
Divorce ends the relationship, not the loan contract. Until your name is removed with your ex’s agreement and the lender’s consent, you stay legally responsible. Refinancing and closing accounts protect both your credit and your future.
