How to sort out your finances when your relationship breaks down

When you have a relationship breakdown, your marriage ends or you split up with your partner, your life isn’t just affected emotionally, there are financial impacts too. 

But you are not alone, there is a wealth of advice and resources available to help you navigate the immediate, medium and long-term future.

Simon Trevethick, head of communications at StepChange Debt Charity, said: “A relationship breakdown is a common driver of debt that we see at StepChange, and is considered a ‘life shock’ that can throw someone’s finances off balance.

“If this is something you’re going through, it’s important to remember you’re not alone.”

From securing your home, to managing joint debt, we have compiled a guide full of resources and organisations that can help take the first steps following a break-up.

What to do first: Securing your home

It’s important not to leave your home without first understanding your rights, particularly if your name is on the tenancy or mortgage.

Citizens Advice says that if you are joint homeowners, what happens to your home will depend on what you can both afford once you’re living separately, how much equity there is in the property and whether you have children.

You and your ex-partner may be able to continue paying the mortgage, or at least contribute towards repayments, after one of you moves out.

However, it may be more practical to make a clean break and agree on a more sustainable long-term arrangement, such as each of you renting or buying your own home.

Separate your finances immediately

The next important step is to separate your finances as soon as you can. Many couples who live together and are not married or in a civil partnership separate without using a solicitor as there’s no formal legal process to go through.

You should close or freeze joint accounts and redirect any personal income to your own bank account. Experts advise that you should also cancel shared subscriptions and direct debits.

For step-by-step guidance, you can refer to MoneyHelper who have a range of tools available tailored to if you were married, in a civil partnership or living together. 

If you were living together (but not married)

A big misconception is that many people assume common law marriage exists. Common law marriage, which means living together would see unmarried couples granted the same legal rights as marriage, is a myth in England and Wales. Unmarried partners have no automatic rights to property, inheritance or financial support upon separation, unlike married couples.

Also, property rights depend on whose name is on the contract and evidence of financial contribution.

AdviceNow has pulled together this guide on how to find out who owns your property, and what to do when you have separated if you are legally married or co-habitating.

If you are married or in a civil partnership

You can use Gov.uk’s divorce guidelines to help you decide how to divide up assets. Deciding who gets to keep assets is more complicated as they are divided based on fairness and not just ownership or who bought them. This includes property, savings, investments and pensions.

If you and your ex-partner agree on how to divide money and property, you need to apply for a consent order to make it legally binding.

You might get things like a share of your partner’s pension including state pension or private pension plan or regular maintenance payments to help with children or living expenses. 

You can often avoid going to court if you and your ex-partner are able to agree between yourselves on how to divide your money and property.

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Child maintenance or support

If you have children, one parent may need to provide child maintenance. This is money paid towards your child’s everyday living costs when they are not living with one of their parents. It applies whether you’ve separated from the other parent or were never in a relationship. In simple terms, it’s a financial agreement between you and your child’s other parent.

You’ll need to have a child maintenance arrangement in place if your child is under 16, or under 20 if they are still in approved education or training.

There are a couple of ways to set this up. You can agree arrangements privately between yourselves if you’re both able to do so, or you can go through the Child Maintenance Service.

The Child Maintenance Service can calculate how much should be paid, organise payments, and step in if a parent does not pay. They can also help resolve disputes about parentage and assist in locating the other parent if their whereabouts are unknown.

How to manage debt after a relationship breakdown

It is important that you don’t ignore existing debts as money owed by both you and your ex-partner will still count and your credit score can be affected by your ex-partner. You should create a detailed budget and list all debts both joint and personal before agreeing on liability with your ex-partner. Make sure you prioritise secured debts, such as your mortgage or rent, and seek free legal advice to understand your responsibility for any shared debt.

It’s also worth contacting lenders as early as possible, and you may want to look into breaking the ‘financial association’ on your credit file. You can also get free, impartial support from StepChange Debt Charity to help you manage your finances.

“Separating from a partner is difficult not just emotionally but also financially – it can reduce your household income or mean you need to spend more each month. You may struggle with bills and debts for a while,” said Trevethick.

“You may have joint debts, utilities, a rental agreement or mortgage, and depending on any of these circumstances, you will likely need to contact your creditors, utility providers, landlord or mortgage company to discuss next steps. 

“If you’re facing debt and going through a relationship breakdown, or worried about your finances, a charity like StepChange can support with free and impartial debt advice during this difficult time.”

Benefits, support and financial safety nets

While divorce and separation can be expensive and take time, there is support available to help you through this difficult period. You may be able to apply for a council tax reduction, housing benefit or local housing allowance, as well as universal credit.

Turn2us offers a benefits calculator that can help you work out what you might be entitled to after a relationship breakdown.

Do you have a story to tell or opinions to share about this? Get in touch and tell us more. 

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