Needless to say, separation is a stressful time where you and your former partner are both adjusting to a 'new normal'. Navigating the 'new normal' can be challenging, particularly when it comes to making arrangements for the payment of expenses. One question we often hear is "who is responsible for paying expenses now?".
Each family is different and therefore, each family's individual circumstances will need to be taken into account. Often the lower income earning party will expect that their expenses are paid by the higher income earning party, but this is not always possible. The reality is that parties now have two households to maintain with the same amount of income that previously sustained one household.
Here are some things to consider when it comes to paying expenses after separation:
Things to consider if you stop paying expenses:
(1) If you stop paying the mortgage and other expenses, this responsibility is likely to fall on the other party, subject to their capacity to pay such expenses.
(2) A few issues can arise where a party does not have the capacity to meet their own expenses including:
- If you have joint assets, your credit may be affected by any defaults made by the other party. This may make it difficult for you to purchase real estate in the future or even obtain a credit card. Furthermore, the bank may act to recover their debt (for instance, through the sale of your property).
- Depending on your financial capacity the other party may request that the Court make orders requiring you to contribute towards their day-to-day living expenses, in circumstances where they do not have the ability to support themselves.
- If you decide to stop paying expenses that you were previously responsible for, it may be prudent to advise the other party in advance that you are doing so, to provide them with adequate time to make arrangements to change the direct debits or policies. This open and forthright communication is likely to assist you with negotiations in the future.
Things to consider if you continue to meet expenses:
(1) In circumstances where you have the financial capacity to continue meeting certain expenses following your separation, it is important to know that whilst your financial contribution will be taken into account for the purpose of a final property settlement, it cannot be 'recovered' or 'repaid' to you, dollar for dollar.
(2) If you continue to contribute to expenses following separation, it reduces the likelihood that your former spouse will initiate Court proceedings to seek spouse maintenance which can be a time consuming and costly exercise to defend. It is very important to obtain independent legal advice about whether it is likely that a Court will make Orders for spouse maintenance in your circumstances and whether an informal arrangement to pay the mortgage and other expenses until settlement may be in your best interest.
(3) It may also be necessary to take into account what type of contributions the other party will be making - for example, if they have the full-time care of your children, they too are making a post-separation contribution.
(4) A cooperative arrangement with your former spouse can assist in preserving goodwill between you while you negotiate a final resolution.
The above information is to be considered separately from child support, which you may have to pay pursuant to any assessment made by the Services Australia (Child Support).
As you navigate the complexities of making arrangements after separation, it is important that you obtain independent legal advice. We can assist you pave the way forward and ensure that you are kept informed every step of the way, as your actions following separation can have far reaching consequences for your final property settlement.
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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.