A common question asked when couples separate is who pays for which expenses until property or parenting matters are settled. This is one of the most difficult and at times irritating issues that separating parties have to deal with, in addition to all of the other problems that they now face with the end of their relationship.
The answer to this question will vary because every couple’s situation is different. Generally, a higher income earning party should pay for expenses because the lower income party is unable to. This is not always the case or possible. This is because parties have to contend with two separate households each with their own expenses, whereas before they only had one set of household costs.
If you are paying for expenses prior to separation but stop afterwards there could be serious consequences:
If one party stops paying for expenses then it may become the other party’s responsibility to continue with those payments post separation. If they have the capacity to do so, then this may not become an issue.
It is only when the other side is unable to or won’t pay for expenses that problems can arise. If parties have a mortgage or other debts which have to be serviced, nonpayment could cause them to default on their mortgage. If this occurs then the credit ratings of both parties will be affected, potentially making it difficult for either to access loans and purchase property in the future.
Mortgages on the family home are most commonly held in both parties’ names. This means that each party is liable for the debt jointly with their partner, and also individually. It is not the case that the bank will say that each is responsible for half of the debt. Both parties are responsible for all of it. In extreme cases of nonpayment the bank may take action to sell the property and recover their mortgage. In the meantime the parties credit ratings have suffered greatly and they have to pay the banks costs of selling the home. This is a situation which should obviously be avoided.
If you are going to stop paying some expenses after separating you should inform that other party that you intend to do so. It only serves to inflame tensions and make settling matters much more difficult if a party stops paying the electricity or other essential services and does not inform their partner. Giving notice will allow the other party time to make their own arrangements so that their life is not disrupted.
Parties should also remember that if they are going to be in court, a judge may well be critical of a party who deliberately makes life difficult for the other party by ceasing to pay important expenses such as electricity or mortgages.
It may also be the case also that a low-income party may ask the court to order that the better off party pays for their living expenses. The family courts have the power to do so under the spousal maintenance provisions of the Family Law Act.
The expenses paid by a party post separation will normally be taken into account in a general way when determining an appropriate property settlement. Be aware however that this will not be on a dollar for dollar basis. A party will not be reimbursed for every dollar they have spent post separation paying for the expenses or obligations of both parties.
The financial contributions of one party post separation will also have to be weighed against the contributions that the other party is also making post separation. These contributions may not always be monetary and for example could include caring for the children of the relationship.
There are benefits from paying for expenses post separation. By doing so it may make it less likely that the other party will commence court proceedings. Court proceedings are costly and time consuming. It may be wiser and cheaper to service a mortgage or make a contribution to the financing of your spouse’s costs rather than to encourage them to file with the courts because of a refusal to pay.
It may feel very satisfying in the short term to refuse to pay, but in the long term it could provide very costly. In contrast paying for some expenses may create a certain amount of good will which will make it easier for a settlement to be negotiated.
We frequently see parties refuse to pay for expenses in circumstances where they cannot be forced to pay, simply because they wish to make matters more difficult for the other side. In many cases the only way to force payment is by an order of the court. Some parties take advantage of the fact that it is expensive to commence court proceedings to force the other side to pay for expenses because they see it as a means to punish their former partner. The only certain outcome of such behaviour is a deterioration in relations and greater difficulty in reaching a settlement.
If you are thinking of separating or have separated and are facing the difficulties associated with who should be paying for which expenses, it is important to seek legal advice on the best way forward. Ill-considered decisions early may make it much more difficult to reach a settlement in the future. At Reeslaw we are very experienced in dealing with these questions and can give you the best opportunity to reach a property settlement with your spouse sooner rather than later. Call today to arrange an appointment.
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