As explained in our earlier insight, more families than ever are now relying on financing arrangements, credit cards or loans. This can have a significant impact and merits careful consideration if a couple are also going through a divorce.
What about mortgages, especially if there has been a mortgage holiday?
An outstanding balance of a mortgage secured against a house owed to the lender is a matrimonial debt. There are special considerations to be made where a house is retained for a while post-separation before being transferred or sold. The figure for the outstanding balance of the mortgage should be obtained and accounted for when decisions about transfer or sale are being made.
Due to the pandemic, many couples have relied on mortgage holidays. A mortgage holiday can impact on the total outstanding balance of the loan, meaning having to pay interest on a higher amount of loan outstanding.
What about BBLS and CBILS?
The Bounce Back Loan Scheme (BBLS) and Covid Business Interruption Loan (CBILS) are terms that didn't exist this time last year. It is though commonplace for those with businesses to have obtained funding during the pandemic. This will ordinarily need to be considered if one of the divorcing parties has a business, if the business will have a balance it needs to repay.
What about tax liabilities?
Tax liabilities are not wholly related to the pandemic, but those with an income may have found that with income streams being interrupted they struggled to meet obligations to meet liabilities, inducing on tax.
Tax liabilities owed to HMRC at the date of separation are a matrimonial debt.
Tax can also be due as a consequence of realising an asset on divorce to affect a settlement. For example, capital gains tax is often due on a disposal.
A 'contingent liability' or 'notional debt' does not form part of the balance sheet of matrimonial property subject to division between a couple. That is not to say that they cannot be considered in the context of a discussion or agreement on the finances. However, the legal precedent is that they are not accounted for in a strict application of the legal principles.