How loans are divided during divorce

How are loans divided during a divorce?

Let's make it clear from the start: not all loans taken out during marriage are subject to division. Debts can only be divided between spouses if the loans were joint. There is no official definition of jointly acquired loans, so we will refer to judicial practice. According to it, the following debt obligations are recognized as joint:

1. Those in which both spouses act as co-borrowers or as a borrower and a guarantor.
2. Those that were taken out with the consent of the second spouse.
3. Those that were taken out by one spouse for family needs. For example, for apartment renovation or house construction.

A person filing a lawsuit for the division of loans will need to prove that the loans were indeed taken for family needs. If this cannot be confirmed with documents, the debt will have to be repaid independently. 

How does the division of loans work?

There are two ways to divide debts, depending on whether the spouses can resolve the issue without involving third parties:

1. Voluntarily, by concluding a corresponding agreement.
2. Through court proceedings.

How are debt obligations divided voluntarily?

The best solution to the issue is an amicable settlement of the dispute. This way, both spouses can avoid time costs and court fees.

If the ex-husband and wife decide not to go to court and wish to divide debts voluntarily, they need to document the agreements. This can be done in two ways:

1. Draw up a written agreement. This can be done both during the marriage and after the divorce. The agreement should specify all the nuances of payments.
2. Draw up a prenuptial agreement. Of course, this must be done either before entering into marriage or during the relationship — you cannot draw up such an agreement after a divorce.

How are loans divided in case of divorce through court?

If the ex-husband and wife fail to resolve the issue amicably, going to court is inevitable. Resolving a dispute through the judiciary is a rather lengthy process, as it consists of several stages:

• gathering evidence;
• drafting and filing a statement of claim;
• holding court hearings;
• the judge's decision coming into force;
• recovering funds from the defendant.

Special attention should be paid to gathering evidence. Without documentary confirmation that the loans were spent on family needs, you are almost guaranteed to be denied the recovery of funds from your spouse. The best option in this case would be to contact a lawyer who will handle the collection of the necessary evidence base. 

Now let's talk about what documents need to be gathered to apply to the court. So, you will need:

• passport;
• the original and copies of the statement of claim according to the number of participants in the trial;
• the receipt for payment of the state duty;
• the divorce certificate;
• loan agreements;
• a bank statement on the remaining debt balance;
• receipts for the fulfillment of obligations to the bank;
• documents confirming expenses.

Please note that this list is only an estimate. A more precise list can be clarified at the judge's reception office. 

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Alternative way to divide loans in a divorce

If none of the above methods suit you, you can try to transfer part of the debt to your ex-spouse. But only if you have not yet fulfilled your obligations to the bank. To do this, you need to contact the lending institution directly.

If you took out a standard consumer loan, the lender will most likely refuse your request. As a rule, banks agree to transfer the debt to an ex-spouse only if the loan was issued against property collateral: real estate or a car. This way, the lending organization will have a guarantee that the new borrower will repay the debt one way or another.

A large percentage of refusals is associated with high banking risks. When issuing a loan to one person, the lending organization thoroughly checks their credit history, employment, and income. The reliability of a husband or wife does not guarantee the fulfillment of obligations by the second spouse.

Without the bank's consent, the document on the division of the loan has no legal force. 

How are loans obtained in a common-law marriage divided?

Loans taken out in an unregistered marriage are not joint. Since the law does not recognize people living in the same territory without registering a marriage as spouses, their property and debts are also not considered jointly acquired.

The only option for dividing a loan in this case is to apply for it as co-borrowers. In this case, the involvement of two people in the credit obligations will be obvious.

Common scenarios

Now let's analyze the most frequent situations related to the division of joint loans upon dissolution of marriage. To do this, let's turn to judicial practice.

Division of a loan obtained during marriage

This is a standard situation. Spouses decide to take out a loan, but issue it not as co-borrowers, but only in the name of the husband or wife. In this case, the court will decide to recover half of the loan only if you can prove that the loan was taken for family needs.

It is worth noting that former spouses often lack actual evidence, as few people in a marriage keep purchase receipts in anticipation of a future divorce.

Division of a pre-marital loan

Liability for a pre-marital loan always rests with the person in whose name the credit agreement was issued. However, the second spouse has a chance to recover money from the primary borrower if they can prove that the debt was paid using joint income.

To have the legal right to divide a loan taken out before marriage, arrange it with both of you as co-borrowers or bring in your spouse as a guarantor. 

Division of a loan repaid after divorce

If, after a divorce, the second spouse pays off a loan issued during the marriage, they are legally entitled to demand the recovery of half of the paid amount from the husband or wife.

Division of a loan obtained during an official marriage when the spouses live separately

If family relations cease, all property acquired by the spouses becomes their personal property. The same applies to loans taken out, even if the marriage was not officially dissolved.

If a husband or wife applies to court for the division of debts, the second spouse will have to make an effort to prove the fact of separate living and the termination of family relations. 

Answering questions

Finally, we will answer the most frequently asked questions on the topic of the article.

I paid off the debt to the bank in 2017. Can I recover half of the amount from my spouse now?

No. In this case, the statute of limitations applies, which is only three years. The best option in your case would be to pay off the debt to the bank by refinancing with another lending institution and immediately file a lawsuit to recover the funds.

I acted as a co-borrower on a loan, but I was the only one who paid off the debt. Can I recover half of the amount from my ex-husband?

Yes, you can file a recourse claim for reimbursement of half of the amount paid for the loan.

Can I claim reimbursement from my ex-wife for loan payments I made as a guarantor?

Yes, you can recover the full cost of the loan from your spouse.

My ex-husband took out a loan when we were no longer living together and filed a lawsuit to divide the debt. Is there anything I can do about this?

You can prove in court that you had no involvement in the loan. To do this, you need to confirm the fact that you were living separately. As evidence, you can bring witnesses, provide receipts, utility bills, etc.

To sum up, immediately after a divorce, it is very difficult to prove that the borrowed funds were spent on family needs. Therefore, it is best to address this issue even at the stage of applying for the loan. First of all, it is better to take out a bank loan as co-borrowers. This way, you will be able to recover half of the paid money without any special problems in the event of a divorce. In addition, you should keep purchase and utility payment receipts at least until the debt to the lender is fully repaid.