This is how your divorce affects debt counselling
No one goes into marriage thinking they will divorce, but divorce happens and affects many aspects of your life.
Debt counselling doesn’t only give you and your spouse a chance to restructure your finances, it also protects you from being pestered by the creditors. But what happens when the marriage is over, and you are still under debt counselling?
Let’s first look at how your marriage contract affects the debt counselling process.
Married in community of property (COP)
“The application to the program will be a joint one and all the debt will be thrown into one pool since the law sees you as one estate,” says Matthys Potgieter, a debt expert from DebtSafe.
It does not matter who incurred the debt, both of you will be liable for repayments. Just like you share the assets with your spouse, you also share the liabilities. When applying for debt counselling all credit agreements must be included in the application.
According to Potgieter, your income will also be joined in the calculations, and the payment of all your debt will take place jointly into one single instalment. Both of you will be placed under debt counselling.
Married out of community of property (ANC)
When you are married out of community of property, you and your partner do not have to both go under debt counselling. However, if there are debts which you both signed for and are therefore both responsible for – for instance, a joint bond – then you both will have to apply for debt counselling. No account may be excluded from the program.
“The debt is a joint responsibility, says Potgieter.
What if my spouse was already under debt counselling when we got married?
Potgieter says when marrying someone who is already under debt counselling, your marriage contract will still play an important role. He says if you are getting married in community of property, be prepared to also apply for debt counselling.
If you are married out of community of property, then you will not be obligated to apply for debt counselling.
What happens when my spouse and I divorce?
“If you already have your Debt Counselling Court Order, that court order will have to be rescinded if you were married in community of property, or in the case of a joint debt counselling application,” says Potgieter.
After rescinding the order, you will need to re-apply for a new debt counselling program with a new debt profile and repayment plan that is separate from that of your ex-spouse or partner. Even if the order has not been granted yet, you will need to re-apply.
Your new application will be separate from that of your ex-spouse or partner and it will be based on your personal debt profile, says Potgieter.
However, depending on the marriage contract, the debt can still be your responsibility after the divorce. When married in community of property, the debt is both your, and your ex-spouse’s responsibility. When married out of community of property, the debt is the responsibility of the individual who signed the credit agreement.
“In the case where you signed surety for your ex-partner on a credit agreement you can also be held liable for that credit,” says Potgieter.
Potgieter also shared the following tips for those who share debt with their ex-spouses:
- Consolidate your debt through debt counselling.
- If you have signed surety with your partner, arrange indemnification with your lawyer.
- Get financial advice from someone you trust.
- Take liability for the fixed living expenses and restructure your credit agreements.
- Return assets if you must, or even sell them, and repay your creditor as soon as possible.
This article has been prepared for information purposes only and it does not constitute legal, financial, or medical advice. The publication, journalist, and companies or individuals providing commentary cannot be held liable in any way. Readers are advised to seek legal, financial, or medical advice where appropriate.