By Mary Stephan, Principal Solicitor

It's one of the first questions clients ask when they walk into my office after separation: "My ex has debt—am I responsible for it?" The fear is real. You've separated, you're trying to rebuild your financial life, and suddenly you're worried about being stuck with loans, credit cards, or other debts that your ex-partner created.

The answer isn't simple. Whether you're responsible for your ex's debt depends on several factors: whose name the debt is in, what the debt was used for, when it was incurred, and how it's treated in your overall property settlement. With significant changes to family law taking effect in June 2025, understanding how debt is divided has become even more important.

This guide explains everything you need to know about debt responsibility after separation in NSW and across Australia.

The Short Answer: It Depends on the Type of Debt

Joint Debts: You're Both Responsible

If both your names are on a loan, mortgage, credit card, or any other debt, you remain equally responsible for the full amount—even after separation. This is called "joint and several liability."

What this means in practice: if your ex-partner stops making payments on a joint credit card, the bank can pursue you for the entire outstanding balance, not just "your half." Your credit rating suffers if payments are missed, regardless of who was supposed to pay.

Individual Debts: Generally Their Responsibility

If a debt is solely in your ex-partner's name and you didn't co-sign or guarantee it, you're generally not personally liable to the creditor. The bank or lender can only pursue the person whose name appears on the loan agreement.

But here's the complication: even individual debts can affect your property settlement. Courts consider all debts—joint and individual—when dividing property following separation.

How Courts Actually Divide Debt in NSW Property Settlements

Under the Family Law Act 1975, debt is treated as part of the overall "asset pool"—essentially, it's negative value subtracted from your total assets.

Here's how it works:

Step 1: Identify All Assets and Debts

Courts start by calculating the net value of everything you own together:

• Total assets (house, cars, savings, superannuation, furniture)

• Minus total liabilities (mortgage, credit cards, personal loans, car loans)

• Equals net asset pool

For example: $1.5 million family home + $200,000 combined super + $50,000 savings - $800,000 mortgage - $30,000 credit card debt = $920,000 net asset pool.

Step 2: Assess Contributions

Courts then examine each person's contributions during the relationship:

• Financial contributions (wages, inheritances, gifts)

• Non-financial contributions (homemaking, childcare, renovations)

• New from June 2025: The economic impact of family violence

This is where individual debts start mattering. If your ex-partner racked up $50,000 in gambling debt during the relationship, courts may attribute that debt solely to them when assessing contributions—reducing their overall contribution percentage.

Step 3: Consider Future Needs

Courts examine factors like age, health, income, care of children, and capacity to earn. New from June 2025: Courts must also consider wastage—if one party recklessly or intentionally wasted money (excessive gambling, extravagant purchases), this affects the division.

Step 4: Determine What's Just and Equitable

The court decides the final percentage split. While starting points might be 50/50 after a long marriage with similar contributions, the final division can deviate significantly based on contributions, future needs, and the June 2025 amendments regarding family violence and wastage.

What Happens to Different Types of Debt?

Mortgages

If both names are on the mortgage, you're both fully liable until the property is sold or one party refinances in their sole name. Even if you move out and your ex stays in the house, the bank can still pursue you if payments are missed.

What you can do:

• Agree on who pays until settlement (document this in writing)

• Apply to the lender for one party to assume full responsibility (requires their approval and refinancing)

• Sell the property and pay off the mortgage from proceeds

• Factor continued payments into your property settlement calculations

Credit Card Debt

Joint credit cards remain both parties' responsibility. Individual credit cards are that person's liability to the creditor.

However, courts ask: what was the debt used for? If your ex has $20,000 in credit card debt but it was spent on family groceries, school fees, and household expenses during the relationship, it might be treated as a joint debt in the property settlement even if only their name is on the card.

Conversely, if they racked up debt on luxury purchases for themselves after separation, courts are more likely to allocate that debt solely to them.

Personal Loans

Similar principles apply. Courts examine:

• Who signed the loan?

• What was the money used for?

• When was it taken out?

• Did it benefit the family or just one person?

Car Loans

If the loan is in one person's name and they keep the car, they usually take responsibility for the remaining debt. If you're keeping a car with an outstanding loan in your ex's name, you'll need to refinance it into your name.

Business Debts

Business debts can be complex, especially if:

• The business is jointly owned

• One spouse guaranteed business loans

• Business and personal finances are intermingled

• Business debts are secured against family assets (like the family home)

Courts examine whether business debts should be considered part of the property pool or remain with the business-operating spouse.

The June 2025 Game-Changer: Wastage Now Matters

A significant change from the June 2025 Family Law amendments is how courts now treat "wastage"—the reckless or intentional waste of property or financial resources.

Previously, proving wastage was difficult and rarely affected outcomes significantly. Now, under the amended Family Law Act, courts must specifically consider wastage when assessing property settlements.

Examples of wastage include:

• Excessive gambling losses

• Extravagant purchases unrelated to family needs

• Deliberately dissipating assets to reduce what's available for division

• Reckless financial decisions causing substantial loss

If your ex-partner gambled away $100,000 or made luxury purchases solely for themselves during separation, courts can now explicitly account for this wastage in the property division—potentially giving you a larger percentage to compensate for the wasted funds.

What About Debts Incurred After Separation?

This is where timing becomes critical.

General Rule: Debts incurred after separation are typically the sole responsibility of the person who created them—unless they were for legitimate family purposes like:

• Children's school fees or medical expenses

• Maintaining the family home pending sale

• Necessary living expenses if one party has no income

Red Flag Debts: If your ex-partner takes on significant new debt after separation (new car loan, personal loans, credit cards), and you're not on those accounts, you're generally not responsible. However, you should document this carefully because courts may need to determine whether these were legitimate expenses or attempts to reduce the asset pool.

What you should do:

• Close joint credit cards and accounts immediately after separation

• Open individual bank accounts

• Redirect your income to accounts solely in your name

• Document any debts your ex creates after separation

• Don't co-sign any new loans or credit applications

Hidden Debts and Non-Disclosure: What If Your Ex Is Hiding Debt?

Both parties have a legal duty of full and frank financial disclosure under the Family Law Act. This includes disclosing all debts, not just assets.

If you discover your ex-partner failed to disclose debts during property settlement:

• The court can set aside property settlement agreements

• Your ex may face cost penalties for non-disclosure

• The settlement can be reopened and recalculated

Common scenarios:

• Tax debts not disclosed

• Hidden credit cards

• Personal loans you didn't know existed

• Business liabilities concealed

If you suspect hidden debts, your family lawyer can issue subpoenas to banks, the Australian Taxation Office, and other financial institutions to obtain full disclosure.

Practical Steps to Protect Yourself From Your Ex's Debt

Before or Immediately After Separation:

1. Document Everything - Make copies of all financial statements, loan agreements, credit card statements, mortgage documents

2. Close Joint Accounts - Contact banks, credit card providers, and lenders to close joint accounts or remove your name (requires both parties' consent usually)

3. Check Your Credit Report - Obtain your free credit report from Equifax, Experian, or illion to see all debts in your name

4. Notify Creditors - Inform banks and lenders in writing that you've separated and request confirmation of your liability

5. Stop Automatic Payments - Cancel any automatic payments from your accounts to joint debts if you've agreed your ex will pay them

6. Don't Take On New Joint Debt - Never co-sign loans or credit applications after separation, even if your ex promises they'll pay

During Property Settlement Negotiations:

7. List All Debts - Create a comprehensive list of every debt, including creditor name, account holder names, outstanding balance, and purpose

8. Determine Responsibility - Negotiate who will take responsibility for each debt as part of your settlement

9. Get It In Writing - Formalize any agreements through Consent Orders or Binding Financial Agreements—verbal agreements aren't enforceable

10. Refinance Where Necessary - If you're keeping an asset with associated debt (car, house), refinance it into your sole name

When Might You Actually Be Responsible for Your Ex's "Individual" Debt?

Even if debt is in your ex-partner's name alone, you might find yourself affected in these situations:

Guarantor Liability

If you signed as guarantor on your ex's loan (business loan, car loan, personal loan), you're legally liable if they default—even after separation. Banks can pursue you for the full amount.

Household Benefit

If your ex's individual debt was used for family expenses (groceries, bills, children's expenses), courts may treat it as a joint debt in the property settlement, reducing the net pool available to divide.

Business Debts with Personal Guarantees

If you guaranteed your ex-partner's business debts or if business loans are secured against jointly-owned property (family home), you could be exposed to liability.

Real-World Examples: How This Actually Works

Scenario 1: Joint Credit Card Debt

Sarah and Tom separate. They have a joint credit card with $25,000 outstanding. Tom agrees to pay it off. Six months later, Tom stops paying, and the credit card company contacts Sarah demanding payment.

Reality: Sarah is legally liable for the full $25,000 because her name is on the account. The verbal agreement with Tom doesn't protect her from the creditor. She'll need to pay the debt and then potentially pursue Tom through the Family Court for reimbursement as part of the property settlement.

Better approach: Close the joint credit card immediately after separation, pay it off from joint savings, or include it in the property settlement with clear court orders about who pays.

Scenario 2: Gambling Debt After Separation

Michael racks up $40,000 in gambling debt in the six months after separating from Lisa. He wants this treated as a joint debt in the property settlement.

Reality: Under the June 2025 amendments, courts can now specifically consider wastage. This gambling debt would likely be attributed solely to Michael, and courts may reduce his property settlement percentage to account for his reckless financial behavior.

Scenario 3: Mortgage in One Name, Both Living There

The family home mortgage is solely in David's name, but both David and Emma lived there for 15 years and raised children together.

Reality: Even though the debt is in David's name, it will be treated as a joint debt in the property settlement because it related to the family home that benefited both parties. The court won't make Emma personally liable to the bank, but the mortgage will be deducted from the property value when calculating the net asset pool.

FAQs: Debt and Separation in NSW

If I move out, am I still responsible for the mortgage?

Yes, if your name is on the mortgage, you remain legally liable even if you no longer live there. However, in the property settlement, courts can order your ex to refinance in their sole name or sell the property.

Can I remove my name from a joint loan after separation?

Only with the lender's consent. Most lenders won't remove you unless the remaining person can qualify for the loan solely in their name (refinancing).

What if my ex stops paying joint debts?

The creditor can pursue you for the full amount. You should pay to protect your credit rating, then seek reimbursement through the family law property settlement.

Are tax debts included in property settlements?

Yes. Australian Taxation Office debts are liabilities considered in the asset pool. If your ex has undisclosed tax debt, this should be factored into the division.

Can I be held responsible for debts I didn't know about?

If you didn't sign for the debt and weren't a guarantor, you're not personally liable to the creditor. However, hidden debts will be considered in the overall property settlement, potentially reducing the net pool available to divide.

How the June 2025 Amendments Changed Debt Division

The Family Law Amendment Act 2024, which took effect June 10, 2025, introduced two significant changes affecting how debt is treated:

1. Wastage Is Now Explicitly Considered

Courts must now consider "material wastage of property or financial resources, caused intentionally or recklessly by a party to the relationship." This directly addresses situations where one partner deliberately wastes money through gambling, extravagant spending, or asset dissipation.

2. Liabilities Must Be Examined in Context

The amendments require courts to consider "the nature of the liabilities and the circumstances relating to them"—meaning courts dig deeper into when debts were incurred, for what purpose, and whether they benefited the family.

These changes give courts clearer power to penalize financial irresponsibility and protect the party who acted reasonably.

What to Do If You're Facing Debt Issues During Separation

Get Legal Advice Early

Don't wait until debts spiral out of control. Early advice from a Sydney family lawyer helps you understand your exposure and take protective action.

Create a Complete Debt List

Document every debt—joint and individual—with current balances, account holders, monthly payments, and what the debt was used for.

Understand Your True Liability

Review loan documents to confirm whether you're a co-borrower, guarantor, or authorized user (very different legal positions).

Negotiate Responsibility in Your Settlement

Your property settlement should explicitly state who is responsible for each debt. Get this formalized through Consent Orders—not just a verbal agreement.

Protect Your Credit Rating

If your ex stops paying joint debts, consider paying them yourself temporarily to protect your credit score, then seek reimbursement through the property settlement.

Consider Interim Orders

If your ex is creating new debts or wasting assets during separation, you can apply for urgent court orders to prevent further financial damage.

The Bottom Line: How Mary Can Help

Debt division during separation is complex, stressful, and financially risky if handled incorrectly.

Many people make costly mistakes by:

• Assuming verbal agreements about debt responsibility are enforceable

• Failing to close joint accounts quickly enough

• Not understanding the difference between liability to creditors versus responsibility in property settlements

• Missing opportunities to protect themselves from an ex's reckless spending

  
  

As a Sydney family lawyer with extensive experience in property settlements, Mary Stephan helps clients navigate these issues strategically. She understands how the June 2025 amendments affect debt division, knows when to apply for urgent protection orders, and ensures your property settlement properly addresses all debts—protecting you from future liability.

If you're separating and concerned about debt responsibility, don't wait until it's too late.

Contact Stephan & Co Lawyers for expert advice:

Serving clients throughout Sydney and NSW

Get clarity on your debt exposure and protect your financial future.

*This article is for general information purposes and does not constitute legal advice. Every separation involves unique financial circumstances. Always seek professional legal advice about your specific situation.