The treatment of post-separation debt in family law property settlements is nuanced and highly fact-dependent. The Family Law Act 1975 (Cth) and relevant case law provide the framework for how courts approach these liabilities.
The general principles as to how the Federal Circuit and Family Court of Australia deals with post separation debt are as follows:
Date of Assessment
The Court identifies and values the parties’ property, liabilities, and financial resources as at the date of the hearing, not the date of separation. Therefore, until there is a formal property settlement, both parties’ finances remain intertwined and their respective property (including assets acquired and debts incurred) remains relevant to the property pool.
Purpose, Benefit and Judicial Discretion
The Court examines the purpose for which the debt was incurred. If the debt was incurred for the benefit of the family or joint purposes such as maintaining a joint asset or meeting reasonable living expenses, it may be included in the asset pool. However, if the debt was incurred unreasonably, negligently or recklessly, it is less likely to be included in the asset pool and may be attributed solely to the party who incurred it. The Court has the power to use its discretion to make this determination.
Evidence and Disclosure
The onus of proof to have post separation debt included in the asset pool is on the party who is seeking to include the post-separation debt. This party must provide evidence that the debt was incurred for the benefit of both parties or the family. Lack of evidence or disclosure may result in exclusion from the asset pool.
Just and Equitable Outcome
The Court’s overriding consideration is whether including or excluding the debt is just and equitable in the circumstances of each case.
Next Steps
If you are seeking advice as to the division of your matrimonial property and/or have concerns in relation to debt that has been incurred after separation, contact us to speak to, or make an appointment with, one of our Family Lawyers. Doolan Callaghan Family Lawyers have a team of experienced family law specialists who can guide and advise you, and assist in resolving your family law matter.
Our Northern Beaches and North Shore family law specialists’ team have over 80 years of combined family law experience.
Call us on 02 9984 7411 or email us at enquiries@doolancallaghan.com.au.
