Pay­ing Expens­es after Separation

Say you and your spouse/​partner sep­a­rate. There may or may not be chil­dren of the rela­tion­ship. Pri­or to your sep­a­ra­tion either or both of you worked and your incomes were used to pay the fam­i­ly expens­es. After sep­a­ra­tion you moved out. Who now pays the expens­es you used to pay for the family? 

Often the low­er income earn­ing par­ty will expect that his/​her expens­es are paid by the high­er income earn­ing par­ty, but this is not always pos­si­ble as after sep­a­ra­tion, the real­i­ty is that par­ties now have 2 house­holds to main­tain with the same amount of income.

Each par­ty should take steps imme­di­ate­ly after sep­a­ra­tion to ensure that all his or her income is paid into a sep­a­rate bank account to which only he or she has access to, and that any redraw or loan facil­i­ties can­not be used by the oth­er party.

The fol­low­ing sce­nar­ios are food for thought:

1. You may choose to stop pay­ing the mort­gage and oth­er expenses
   1. If you stop pay­ing the mort­gage and oth­er expens­es, the oth­er par­ty may have to pay these, sub­ject to his/​her capac­i­ty to do so. How­ev­er, the fol­low­ing issues may arise if the oth­er par­ty has no capac­i­ty to make the pay­ments or choos­es not make the payments: 
      • your cred­it rat­ing may be affect­ed by any defaults on the mort­gage if you are a joint mort­gagor. This may make it dif­fi­cult for you to pur­chase real estate in the future or even obtain a cred­it card. The bank may take action to recov­er their debt (for instance, through the sale of your real estate which could beat a ​“fire sale”).
      • depend­ing on your actu­al finan­cial capac­i­ty (your income less your expens­es), you may find that the time­line with­in which Court pro­ceed­ings are com­menced are now expe­dit­ed. The oth­er par­ty may request that the Court grant him/​her a hear­ing for urgent and / or inter­im spouse main­te­nance. This is of course, sub­ject to the gen­er­al prin­ci­ples in rela­tion to spouse main­te­nance, which you can read about here.

Should you decide to stop pay­ing the mort­gage and oth­er expens­es, we would encour­age you to advise the oth­er par­ty in advance that you are doing so, so that he/​she has some time to make arrange­ments to change the direct deb­its or poli­cies. Ter­mi­nat­ing the elec­tric­i­ty account on the for­mer mat­ri­mo­ni­al home and leav­ing your spouse/​partner, and poten­tial­ly your chil­dren in the lit­er­al dark does not set the stage for ami­ca­ble nego­ti­a­tions in the future, not to men­tion it may sig­nif­i­cant­ly affect your chil­dren’s wellbeing.

2. You may choose to con­tin­ue pay­ing the mort­gage and oth­er expenses.
   1. You need to take into account how­ev­er, that it is not nec­es­sar­i­ly the case that at the end of the day you will receive any finan­cial adjust­ment for doing so, espe­cial­ly if there are chil­dren who reside in the for­mer mat­ri­mo­ni­al home. While pay­ments towards the mort­gage may be con­sid­ered a post sep­a­ra­tion finan­cial con­tri­bu­tion, it is like­ly that the oth­er par­ty will be con­sid­ered to have made oth­er con­tri­bu­tions to ​“off­set” this such as, care of the chil­dren dur­ing that peri­od. Some par­ties mis­tak­en­ly believe that at the time of the final set­tle­ment or judg­ment, they will receive a cash amount equiv­a­lent to the amount spent by them post sep­a­ra­tion. This is not correct. 
   2. This does, how­ev­er, gen­er­al­ly ​“keep the peace”, allow­ing for nego­ti­a­tions to occur between par­ties which may lead to a final res­o­lu­tion. It may stave off any inter­im appli­ca­tion for spouse main­te­nance which may be a time con­sum­ing and cost­ly exer­cise to defend. You should seek legal advice about whether it is like­ly that a Court will make Orders for spouse main­te­nance in your sit­u­a­tion and whether it is advis­able to agree to an infor­mal arrange­ment to pay the mort­gage and oth­er expens­es until settlement.

The above infor­ma­tion is to be con­sid­ered sep­a­rate­ly from child sup­port, which you may have to pay pur­suant to any assess­ment made by the Depart­ment of Human Ser­vices (Child Support).

Any­thing you do or cease to do fol­low­ing your sep­a­ra­tion poten­tial­ly has far reach­ing con­se­quences for your final set­tle­ment, and it is advis­able for par­ties to seek legal advice to dis­cuss their per­son­al cir­cum­stances and how to best pro­ceed fol­low­ing such separation.