Divorce: consequences on loans in progress
Today, divorce unfortunately seems to be commonplace. Indeed, in 2014 there were 24,310 separations according to the General Directorate of Statistics of Belgium. Even though some divorces run smoothly, others seem to be more brutal. Indeed, it can be a painful event where the very present emotions can blind reason. The situation can quickly deteriorate in case of divorce especially when it comes to the fate of loans subscribed in progress.
In the context of a divorce procedure, in addition to the administrative and legal steps, you must also organize financial procedures with your ex-partner. It’s not just the house or the family car, but also the credits in progress. Think, for example, of a home improvement loan.
What will happen to your loan in the event of a divorce?
In this case, the person who signed the loan agreement is normally the one who is responsible for it. If the loan has been contracted jointly, the bank may claim the refund from both spouses. Similarly, when a spouse subscribes to a loan and the other is a guarantor, the latter becomes jointly and severally liable in the same way as the main borrower. This is independent of the matrimonial regime.
In addition, if you are married or cohabiting by right, you can be held liable for debts that your spouse would have contracted separately, even if you have not guaranteed. Here, it will depend on the matrimonial regime.
Does the repayment of a loan depend on the matrimonial regime?
Different matrimonial regimes exist. Depending on the scheme under which you are this will have an impact on the payment of your outstanding debts during a divorce. Here are the four possibilities:
- Cohabitation of law or fact
When you live together, whether in law or in fact, each partner is responsible for the debts that he or she has subscribed. However, if a loan has been made by a legal cohabitant and can prove that it was for the essential needs of family life or for the upbringing of children, the other cohabitant becomes jointly responsible for the reimbursement of this loan.
- Marriage under the legal regime
The statutory scheme is applied by default when you marry, unless you jointly decide on another plan. He makes a distinction between three different heritages, namely the common heritage and each personal patrimony of the spouses. During a divorce, only the commons will be shared. All debts incurred during the marriage are considered concluded in the interest of the family and fall into the common heritage. Similarly, debts that can not be proven to belong to a particular spouse.
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- Marriage under the separation of property regime
The regime of separation of property recognizes two distinct types of heritage, namely the patrimony of each spouse. The spouses each keep their own property and are responsible for their own debts. However, they may have indivisible common property. Debts contracted by one of the spouses before or during the marriage remain his personal responsibility, whatever the cause. The only case where both spouses are jointly liable for the debts is when both have signed a credit together.
- Marriage under the community of property regime
This form carries many more risks for the spouses. Indeed, when you are married under this regime all property and all debts are part of the common heritage. In case of credit entered into by one spouse, the creditors may appeal jointly to the other spouse to pay the debt.
What about mortgage credit?
For the mortgages concluded during the marriage three options are available to you:
- You sell the property. The bank will be refunded with the money from the sale. If that’s enough, you’ll have paid off your debt. Otherwise, you will need to find an arrangement with your ex-partner to pay the remaining amount.
- Your partner buys you the good. In this case, the latter will also take over the loan. This agreement is concluded between you and your former partner. The latter must have the necessary liabilities and the agreement of the bank to resume the credit. In particular, it may require additional guarantees depending on the financial situation of your partner
- You keep the house. In this case, you must find an arrangement with your partner to define the terms. Indeed, you can expect that both parties will own and that one of the partners will remain on the place in question in return for compensation.
Can I apply for a new loan after my divorce?
If the divorce is not yet final, this new loan will fall under the community of good, in the case of a legal regime or community of property, which implies that both spouses will be responsible. Once the divorce is behind you, you can take out a loan to buy a new car, for example, if the old car was awarded to your ex-spouse, or for new furniture.
Of course, it is also possible to use this credit to cover the cost of a separation. Think for example of alimony that should be paid to your ex-spouse or your children. Borrow money only if you really need it and can manage it. Check well if you will be able to repay the loan after the divorce proceedings and the distribution of money, property and debts.