What happens to joint debts after separation?

Joint borrowers can each be responsible for the whole debt, rather than just half. Check the loan contract and ask the lender to confirm your role. Moneysmart: Relationships and money.

Moving out or agreeing that the other person will pay does not remove your name from the lender's contract.

Changing the property agreement does not automatically change the mortgage. Both people can remain responsible to the lender until the old loan is refinanced, repaid or formally changed.

A shared credit card needs a separate check. Being an additional cardholder is different from being the person responsible for the debt. The primary cardholder is responsible for the account, including spending by an additional cardholder. Ask the provider who is liable and how to cancel any additional card access safely. See Moneysmart on relationships and money.

Our guide to changing a home loan borrower explains why changing ownership and changing the loan require separate steps.

Find the account, amount, dates, reporting status and what has happened since. A missed payment, arrears, hardship notation and default are not interchangeable.

See the OAIC guidance on repayment history and defaults and financial hardship information. Ask what your arrangement will change, what you must pay and how it will be reported.

Start with your full credit report and lender statements. A credit-score app may show a change without explaining which account caused it. The next lender will check what happened, how recently it happened, whether the debt is still open and how it will be dealt with at settlement.

Use the home loan declined guide to work through the reason given. If the credit issue is established, the bad-credit home loan guide explains how a human assessment may differ from an automated response.

If information is wrong, incomplete or misleading, ask the lender or credit reporting body to investigate. If they agree it is wrong, they must generally fix it within 30 days. If they don't, they must explain why and tell you how to complain. The OAIC explains how to request a correction. If the problem involves coercion, unauthorised debt or financial abuse, get legal help as well; do not assume it is only a reporting error.

I would prepare a short timeline covering when the separation occurred, who controlled the account, when the arrears began, when they were discovered and how the debt will be resolved.

Attach the account statements, current payout figure, credit report, property or separation agreement where relevant and evidence showing how the debt will be closed.

If a sale or refinance will clear the debt, show the numbers and the settlement condition. "It will be paid" carries less weight than a current payout figure and a transaction that has enough funds to complete it.

Sometimes a new loan may be assessed subject to identified debts being paid and closed at settlement. That is not a rule every lender will accept, so the condition and settlement funds need to be confirmed before relying on it.

Once the transaction is complete, keep the discharge, closure or payout evidence and check the accounts again. Past repayment problems may still appear on your credit report after the debt is resolved. Closing the debt can help your application, but it does not instantly reset your credit score.

For a mortgage, that may mean refinancing into one person's name, selling and paying out the loan, or another change approved by the lender. For cards and personal loans, it may mean paying them out and closing them.

A refinance only works if the person keeping the loan can afford it and every settlement condition can be completed. Until then, keep monitoring the joint account even if the property agreement says the other person will pay it.

If the next purchase depends on the old home selling or the joint mortgage being cleared, map that timing before signing a short finance clause. Until the transaction completes, the debt remains and the sale proceeds are not yet available.

About this information: General information only. It is not legal, financial or credit advice. Credit reporting, disputes, hardship and lender decisions depend on the actual account history and current rules.

Client examples are based on real situations. Names and identifying details have been changed.