Managing Debt Division in Townsville Property Settlements

Debts are divided during property settlements in the same way as assets and must be considered part of the relationship’s overall financial picture. 

When couples separate in Queensland, the legal process of dividing their finances includes not only assets like property, cars, and savings but also liabilities such as credit card debt, personal loans, and mortgages. 

What Is Property Settlement? 

Property settlement is the legal division of both assets and debts after a relationship ends. Under the Family Law Act 1975 (Cth), separating couples—whether married or in a de facto relationship—must divide their entire financial pool, which includes all liabilities. 

Types of Debts Considered in Property Settlements 

All debts, regardless of whose name they’re in, are included in the property settlement. These include mortgages, credit cards, personal loans, car loans, ATO debts, and any other financial liabilities incurred during the relationship. 

How Does the Court Divide Debt? 

The Court divides debts using a four-step process that also applies to asset division. This includes identifying the net property pool, considering contributions, assessing future needs, and ensuring the final decision is just and equitable. 

Step 1: Identify and Value the Net Property Pool 

The net property pool includes all assets minus all debts. This step requires full disclosure of financial information by both parties to create a complete and accurate picture of the relationship’s financial status. 

Step 2: Consider Contributions 

The Court considers both financial and non-financial contributions made by each party. This may include who paid for what, who managed repayments, and who contributed to homemaking and parenting. 

Step 3: Assess Future Needs 

Future needs like age, health, income potential, and care responsibilities influence how debts are allocated. A party with fewer financial prospects may receive a more favourable share of assets or less responsibility for joint debts. 

Step 4: Just and Equitable Division 

The Court must ensure the final division of assets and debts is fair to both parties. This catch-all step helps ensure that no one is unfairly burdened, particularly when one party has incurred debts for personal reasons or reckless purposes. 

Are All Debts Shared Equally? 

No, debts are not automatically shared equally in a property settlement. The Court will consider the purpose of each debt, who incurred it, and whether it benefited the relationship as a whole. 

Factors Influencing Debt Division: 

Several key factors influence how debts are divided, including who incurred the debt and for what purpose. 

• If a debt was used for family purposes, it is more likely to be shared. 

• If the debt was solely for one party’s benefit (like gambling), that party may be solely responsible. 

• Who is paying off the debt post-separation can also influence how it’s divided. 

What About Joint Debts? 

Joint debts remain the responsibility of both parties unless the lender agrees to release one of you. Even if a property settlement allocates a debt to one person, banks and creditors can still pursue both parties unless refinancing or release arrangements are made. 

Can One Party Be Made Solely Responsible for a Debt? 

Yes, if a debt was incurred for personal gain or recklessly, the Court may assign it entirely to one party. For example, secret spending, personal loans, or debts taken out without the other party’s knowledge can result in sole liability. 

Practical Tips for Managing Debt Division After Separation 

To manage debt division effectively, gather full financial records and avoid taking on new debt. Taking the following practical steps can help protect your financial future: 

1. Get a complete list of debts and assets. 

2. Avoid creating new liabilities. 

3. Communicate with creditors about your separation. 

4. Refinance loans if you're taking over sole responsibility. 

5. Finalise your agreement through legally binding Consent Orders or a Binding Financial Agreement. 

Debt in De Facto Relationship Breakdowns 

De facto couples in Queensland are subject to the same rules as married couples when dividing debt. However, strict time limits apply—de facto partners must apply within two years of separation. 

What If We Agree on the Debt Division Ourselves? 

Even if both parties agree, you must formalise the arrangement legally to protect yourselves. Informal agreements are not enforceable and do not bind creditors—meaning either party can later dispute the terms or be chased by lenders. 

Why You Need Legal Advice 

Legal advice is essential to ensure debts are fairly divided and you’re not liable for more than your share. Without professional guidance, you risk future disputes, credit issues, and unfair financial burden. 

Speaking to experienced property settlement lawyers in Townsville can help you negotiate a settlement that is fair, enforceable, and tailored to your unique circumstances. 

Call to Action: Get Expert Help to Divide Debt Fairly 

Don't risk an unfair financial outcome—speak to Sarinas Legal today. Our knowledgeable family law team in Townsville can help you reach a just and secure property settlement, including the fair division of debt. 

Contact Sarinas Legal now for a confidential consultation and take control of your financial future with confidence.