One of the biggest considerations when parties separate is who will pay the mortgage and other expenses in the period before separated parties reach an agreement. Generally, these expenses don’t stop when two people separate- and parties to a relationship which has broken down often see a drastic increase in other expenses as a need arises to pay for things such as a substitute rental property, moving expenses, legal fees, and counsellor and psychologist fees.

The need to access funds prior to finalising your property settlement and payment of interim expenses can be a key reason parties end up in court on an urgent basis.

Mortgage

It is important that separated parties prioritise continuing to pay scheduled mortgage repayments following separation. Failure to pay can have implications for both parties, including on their credit rating or (more drastically, and if not quickly remedied) a forced sale of the home by the bank.

Taking funds out of the redraw facility unilaterally may trigger the other party to take urgent Court action. This is costly and stressful for everyone, and often could have easily been avoided. Parties should also consider putting re-draw facilities on a two-to-sign basis (where both parties have to agree prior to any funds being released).

Often, when both parties earn an income, and when one leaves the family home and needs to pay rent elsewhere, a common arrangement is that the party remaining in the home pays the mortgage repayments, and the person leaving pays rent at the new accommodation. With high interest rates and large household debt, this is becoming less achievable for many couples. Separating couples should try to negotiate an arrangement for the payment of household expenses (including the mortgage(s)) before changing their living arrangements, and ideally sustain interim arrangements until they reach a final agreement. This is particularly important where one party has access to more of the funds and income of the relationship than the other party.

If you aren’t able to reach an agreement, you should seek assistance from a solicitor and your financial advisor. Your advisors can help you to assess the relevant expenses, funds and resources available, and both parties’ income streams and guide you as to the best course of action. If agreement cannot be reached, your solicitor may advise you to commence proceedings in the Federal Circuit and Family Court of Australia to seek urgent financial relief. Court can and should be avoided, but this may be the only way to obtain an arrangement for the payment of interim expenses without agreement from the other party.

In determining what interim orders to make, the court will consider a range of relevant considerations, including:

• Who is paying for what expenses (including for the children);
• What the arrangements were prior to separation; and
• Each party’s intentions, their capacity to pay, and living arrangements.

If your matter reaches an interim court hearing and it is clear that neither party has capacity to pay the mortgage, the court may order the sale of the property. Getting advice early is the best way to avoid this outcome.

Children’s expenses

Both parents have a duty to support their children after separation. Before or during separation, after seeking advice, parties should try to negotiate an arrangement for the payment of expenses for their children. An assessment by Services Australia for child support will generally be insufficient to cover expenses such as private school fees, extra-curricular activities and private health insurance. Any agreement reached privately about the payment of children’s expenses must be formalised as a binding child support agreement to be binding.

If you have separated and are not receiving financial support for your children, you should seek advice urgently.

Will it ‘come out in the wash’?

Will a party will receive ‘credit’ for continuing to make payments or financially supporting the children when the matter is determined on a final basis?

It depends….

If your matter reaches litigation (i.e. determination by a court), then post-separation contributions can be considered. However, the court takes into account a range of factors, and post separation payments will not necessarily result in an adjustment.

Takeaway

Get advice early and before you make any significant changes to your living arrangements and finances.

Here to Help

Contact us for advice and assistance regarding who should pay what after you have separated.