There are many situations where family members help each other
out by lending money to each other. The loans are often unrecorded,
informal, and rely on the trust and relationship between the family
members involved. They are sometimes called "unsecured"
debts. Circumstances where there might be an unsecured debt
Where parents help their child or children buy their first home
or make improvements to their home;
Where siblings help each other out for short term emergency
Where members of family invest in a new business established by
a member of the family; and
Where parents lend money to a child to assist them with legal
Usually, when parties apply to the Family Court for a property
settlement, the Court will take into account the assets and
liabilities of the parties. However, the Court may disregard an
unsecured debt owed to family members in the overall division of
the parties' assets.
If the debt is genuine, the fact that it is owed to friends or
relatives is not relevant, and the Court will include the debt as a
liability it considers the division of assets between the
Ultimately, the determination of whether the debt is genuine and
repayable, or whether the legal obligations and interest are real,
will depend on:
the existence of written, historical evidence as to how the
parties have treated the debt or legal obligation/interest;
and the credibility of the parties at Trial.
Where the evidence of the parties is vague, or where there was
an "understanding" that the "debt" would not
have to be repaid, the Court may choose to find that the debt was
not repayable, and distribute the pool of assets without deducting
the debt owed to the family member as a liability of the parties.
However, the Court will only take this step after careful
consideration of the evidence and circumstances of the case.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Sect.117 can deal with false statements and knowingly making false allegations of violence could justify a costs order.
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