Is there a separation of debt in a marriage (NZ)?

January 16, 2009 1:32 AM

Separation of Personal Debt in an Ongoing Marriage (NZ Law)

Hi

My wife and I have been married for more than 3 years.
Due to my spending habit, I am frequently in debt. Currently I still owe more than $40k student loan (to the government, but is interest free), and have personal debt in credit card of $2k.

Every month my salary goes into paying off my debt. This has been ongoing for years throughout my life but has only recently gone worse as I have lost more than $5k from the stockmarket/FX trading. I received this money from her parents.

My wife knows that I have been having debt problems, but she believes I could change. Recently she is looking into jointly buying a new house. When she discovers that I have no savings, moreover in debt, and she has herself $20k savings, she was furious. In the past and currently all our household expenditures have been split equally in half, including dining out. We have both been in the workforce for more than 3 years now. My salary has always been higher than her and only during this year that her salary went up more than mine.

We both would still like to be together but she is concerned about my personal debt and also because of my past behaviour where I have hidden certain things from her, she is afraid that I might get into debt and she has to bear my burden if things happen to me.

I would like to know if anyone knows that we could get into an agreement where we could both live together, but if there is any debt, they remain separate even in a divorce. Please only comment about this if you know the New Zealand Law as we both live here.

Thanks in advance for any advice

posted by thomasck to law & government (4 comments total)

my apology for my english as it is my second language. let me know if there is something you don't understand.
posted by thomasck at 1:34 AM on January 16

First up, I am a New Zealand Lawyer. However, I have no experience in Family Law whatsoever, and no resources other than the internet at the moment. This does not constitute or substitute for proper legal advice, which I advise you should obtain.

Situations like this are complex. Your first step should be to go to your local Citizen's Advice Bureaux (http://cab.org.nz/) or Family Court. Even better, go to your local Community Law Centre (http://www.communitylaw.org.nz/). These places will provide FREE initial legal advice, and can sometimes accomodate english as a second language, such as with translators. I know that many, if not all, of the Community Law Centres devote one night a week to dealing with Family law issues such as this.

As far as I am aware (again, my best guess only), this is how the law applies to your situation:

Under the Property (Relations) Act, in a marriage situation such as yours, all "relationship property" gets divided equally in the event of a divorce, etc. I believe this also applies to debts. The fact that the debt is your own, and you appear to have accrued the student loan prior to the marriage, may mean that it would count as "personal property", but that depends on the facts. You would need to speak to a lawyer.

There is a way to contract out of the Property (Relationships) Act with a written agreement. You will need to speak to a Family Lawyer about this. It's commonly done, but has to be done properly, or else it won't apply. For example, both you and your wife would need independent legal advice before signing it.

So in conclusion, there's a chance that your wife would share your debt now, if you separated. If you want to stop that, speak to a lawyer about making a written agreement regarding what happens with your personal debts.

For more info, there are a lot of pamphlets online: http://www.justice.govt.nz/family/pdf-pamphlets/Relationship%20Property.pdf, http://www.lawyers.org.nz/PDFs/LAP/08DividingRelatProp.pdf, http://www.cab.org.nz/information/6%20Division%20of%20Relationship%20Property.pdf. But I would make my first step going to the Community Law Centre.

As a final aside - and I hope you don't mind me saying this - but do try and find a way to get out of debt. It only makes things harder for everyone.
posted by The bat in the hat at 2:30 AM on January 16

There is the option of a post nuptial agreement.
posted by saucysault at 9:22 AM on January 16

an agreement where we could both live together, but if there is any debt, they remain separate even in a divorce.

This is the wrong approach. With this question, you're essentially asking "How can I continue with my foolish spending habits, poor debt management, and sneaky hiding behaviour and still protect my wife from this crapstorm in the somewhat likely event she leaves me because of these issues?"

What you should be asking is: "How can I learn to spend money within a budget, get out of debt, and earn my wife's trust so we can move forward and build our financial future together securely?"

Your wife has, apparently, much better savings and debt management skills than you do. The fact your finances are divided is essentially enabling you to carry on with your spending in secret. Join your finances into a joint account with both your names on it, put your wife in charge of your household and personal budgeting, and give her all of your credit cards.

As part of your household budget planning, the two of you need to work out how you're going to pay back the 25K that you owe. It may well take some scrimping and sacrifice on your part, but that's the cost of being a grownup about your debt.

Once your debts are cleared, take the amount of money you were making in credit card payments and re-payments to her parents, and put that money into a fund towards a downpayment on the house you want.

DO NOT take on the debt of a house now. Immediate gratification has not been good to you, and you need to clear your consumer and personal debts before taking on the additional debt of a mortgage. Yeah, there are other ways you could work that, but don't - do it the responsible way, learn your lesson, and form good habits to see you through a financial lifetime. Preferably with your wife.
posted by DarlingBri at 10:16 AM on January 16