Debt and divorce

2011-03-05 10:42

Nhlanhla bought a house with his wife.

Their marriage hit the rocks, along with their ­finances, and they had to sell their home on auction and were left with an outstanding mortgage bond of R350 000.

They subsequently got divorced through the Family Court.

“When we decided to get the divorce, we could not afford lawyers so a lot of things might have been missed. We did the divorce ourselves through the courts. As we had no assets, we did not have an order on the debts we had,” says Nhlanhla.

Nhlanhla is concerned about what will happen to the debts and who will be ­responsible for paying them.

“Will the bank be prepared to split the debt in two? I know my ex-wife will not pay a cent of it,” says Nhlanhla.

Another reader, Fox, is currently in a legal battle with his ex-wife over the sale of their property. When they divorced two years ago, the court ordered him to pay the bond for six months, at which point the property would be sold.

His wife originally offered to buy his share of the property.

However, she does not have the money to do so now and is refusing to ­consent to the sale of the property.

“This is delaying my plans for the future and I am battling financially,” says Fox.

The problem is that in both these cases the parties were married in community of property.

This is the standard default ­marriage contract in South Africa and it is the contract under which you will be ­married if you do not sign a separate ­contract, such as an antenuptial.

Community of property means that all the property belongs to both parties.

When you get divorced, the assets will be split in half, but you are both responsible for any debt that you incurred during your ­marriage and the debtors can approach ­either spouse to collect the money.

The lawyer’s comments

Judy von Klemperer of Shepstone & Wylie Attorneys’ litigation department says because Nhlanhla was married in ­community of property, the debt on the property is a joint debt.

They are “jointly and severally liable”.

What this means is that each partner is not just liable for half the debt now that they are divorced, in fact the bank can seek the full amount from either of them.

The one spouse who is held liable by the bank would then have a claim of 50% of the debt against the other, but it would be his or her responsibility to collect that debt (not the bank’s).

“The bank may agree to accept 50% from one person and release them from the ­liability, but it does not have to,” says Von Klemperer.

In Nhlanhla’s case, First ­National Bank (FNB) agreed to accept 50% payment and to release him from liability.

“I will be servicing mine and they have confirmed that no interest will be charged on the balance,” says Nhlanhla.

According to FNB, normally the divorce settlement makes a special mention of the mortgage. But if there is no clause in the divorce, the joint liability principle applies.

After a divorce, the husband and wife should present their bank with a copy of the divorce settlement. This will remove any uncertainty about ownership and liability for bond payments.

The situation with Fox is more complicated as it requires some legal intervention. Von Klemperer recommends that he tell his ex-wife that either she buys him out within a set period of time or he will sell the property in terms of the order granted.

“If she will not sell, I would advise that he approach the court for a receiver to be appointed to divide the joint estate.

“If they entered into a settlement ­agreement and one got the property, then they must follow that route,” says Von Klemperer, who explains that if parties are married in community and they cannot agree on how to split the assets, then a ­receiver can be appointed to gather the ­assets and liquidate them.

He will then pay the debts and split the balance.

Fox has taken this recommendation and will approach the courts.

He will hopefully be able to sell his ­property for more than the outstanding debt, otherwise he will need to approach his bank to discuss a settlement.

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