What's mine is yours -- unless we split up

By Marianne Curphey

Separating from your significant other is hard enough. But if you and your partner don't understand or agree on how to divide joint financial responsibilities, things can quickly escalate. Whether your relationship is still in the honeymoon phase or about to fizzle, it's wise to know how to settle your finances if you call it quits.

In many cases, finances are the reason for the split. A study by Prudential found couples hide savings, investments, debts and even income from one another. And research from Aviva found that three in 10 Brits row with their partner because one of them is overspending.finances-when-you-separate

"Many people may have perfectly valid reasons for keeping a stash of savings or personal debts secret from their other halves," says Prudential's Vince Smith-Hughes of the study's findings. "However, these financial secrets could pose a serious risk to a couple's future retirement income. Making repayments in retirement on an unexpected debt will have a negative impact on a couple's income."

If differences over money or other issues become so severe you're thinking of splitting with your partner, it helps to know what you need to do to make a clean break financially. Below are answers to some questions common among separating couples.

*What happens to credit card debt when you split up?
"A credit card is only technically in one name, and therefore the account holder is liable for the debt," says Paul Crayston, media officer at National Debtline. "That debt is yours if you are the named account holder," he warns.

Of course, you can always make arrangements to have your partner pay all or some of the bill, but you are the one who is legally on the hook to the creditor, even if a divorce decree says otherwise.

*Who needs to know you're separating?
You need to keep Inland Revenue informed, says Wilma Allan, money coach and founder of the Money Midwife.

"Make sure that you continue to pay rent, mortgage, council tax and utility bills and any other debts that will keep the bailiffs at bay. You don't want to receive a visit from them if you can at all avoid it," she says.

*What happens if your partner refuses to pay a joint debt? Who is liable?
If you have a joint debt, then both parties are liable. For example, with a joint bank loan, the creditor can pursue either or both parties.

"If one [person] is flat refusing to pay, then the creditor may choose to pursue the second one," says Crayston.

*Is there a difference between being married and living together in terms of liability for debt?
If you have a financial tie to someone -- a joint bank account, loan or mortgage -- it doesn't make any difference whether you are married, in a civil partnership or living together. You are both responsible for the debt.

*What are your rights if your partner runs up a debt on your credit or debit card without you knowing?
"If you are the named cardholder and you allowed your spouse or partner to use your credit card but they ran up large debts without telling you, then you are liable for the debt," says Crayston. "You are expected to take responsibility for that leap of faith."

If fraud or criminal behaviour was involved --  for example, if your partner took your card without your permission and used your PIN -- then there is some debate over whether that is your responsibility, says the Money Midwife's Allan. She suggests you discuss it with your solicitor.

*How can you financially dissociate yourself from someone?
Once you've disentangled yourselves from each other, contact your credit reference agency to add a note of correction to your file. "Explain that you no longer have a financial connection with your spouse or partner," says James Jones, head of consumer affairs at credit reference agency Experian. "They will then keep this on file and it will be visible to a company when it accesses your report to make a credit search."

Note that you need to wait until you no longer have joint debt or joint accounts together, though in some circumstances, a joint mortgage may be exempt.

See related: 3 signs your relationship is headed for financial trouble, One in four expect to see partner's credit report

Published: 29 January 2014