How are debts owed to family members dealt with in divorce proceedings?

The first question for the court to determine is whether the debts are legitimate, and this is a question of fact. Sometimes ‘soft loans’ from family members may not be considered as repayable and some may even be sham arrangements to deplete funds from a matrimonial pot.  Therefore, the first question is for the Court to determine whether or not the debt exists and if so, who ought to be responsible for it.

In the leading of P v Q, Judge Hess gave guidance on when a family debt is likely to be considered a ‘soft debt’ or ‘soft loan’, versus a ‘hard debt’ or ‘hard loan’. The application of the guidance will depend on the circumstances of each individual case. Typically to be treated as a ‘hard loan’ the debt will need to be properly evidenced including the agreed repayment terms.

Depending on whether the Court determine the debt to be a ‘soft loan’ or a ‘hard loan’ will then determine how it is treated within the division of the parties assets in divorce.

If you require any further assistance, or wish to book in for an initial consultation to discuss your situation, our family solicitors are based in both Wolverhampton, Cradley Heath and Sutton Coldfield serve clients across the West Midlands. For all new enquiries, please call 01902 328 355 or complete our online enquiry form and a member of our team will respond.