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Tag Archive: de facto

  1. Sexually Transmitted Debt

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    Sexually Transmitted Debt

    New relationships often carry the excitement and anticipation of discovering what hopefully will be rich mix of many common interests and values combined with admirable differences. However sometimes, along with all of the positives, comes the shock discovery that the new man or woman is riddled with debt! Whether the new partner’s financial troubles are sourced from a one-off past misadventure or a healthy (and ongoing) appetite for overspending, resolution of the debt situation will obviously become a shared problem if the relationship is to continue.

    For the partner who is asset positive, there is an understandable trepidation, about how they might protect themselves for the other partner’s liabilities, particularly if the relationship was to eventually breakdown and the couple choose to separate.

    Here there is a combination of good and bad news.

    The good news, is that the mere formation of a relationship (even a formal marriage) does not automatically result in the debts of one spouse becoming a joint liability between the couple. Consequently even if the couple stay together, the creditors of one spouse cannot pursue the other spouse’s assets for repayment of the debts*. Also, if the couple do separate at some time after the original debts are paid off, the past asset negative position of the debt ridden spouse may result in the other spouse (who was originally asset positive) being able to retain a much greater share of the present day asset pool.

    The bad news however is that if the couple were to separate before the asset negative spouse’s liabilities have been paid off and the couple have subsequently acquired some other assets, the Family Law System prohibits the division of the other assets in any way that might result in creditors being left unpaid. Consequently, if one spouse puts $50,000.00 of his/her own cash into the purchase of a jointly owned home but the other spouse still has a personal credit card debt of $20,000.00, the  Court might order the credit card to be paid off out of the $50,000.00, with the result that the debt riddled spouse leaves the relationship debt free and the asset positive spouse leaves $20,000.00 the poorer! Orders of this sort are not automatic and there are other ways to defend against the threat   but it is definitely a risk to bear in mind for anyone taking on a partner with heavy liabilities in tow.

    * this assumes the asset positive partner has not subsequently refinanced  the debt into joint names or given a personal guarantee for the debt. 

  2. Legal loop holes to cause major problems for De Facto couples

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    In 2009 new laws were introduced into Australia which were, for the first time, supposed to give de facto couples the same rights as married couples when it came to a breakdown in the relationship and separation.

    Some recent decisions from cases in the Family court however have now made it very clear that all is not equal between married and de facto spouses and that in actuality a shortfall with the 2009 laws has potentially left de facto spouses with the ability to manipulate the family law system so as to significantly disadvantage their former partners. In a nutshell the problem is this:

    • In many de facto (and for that matter marital) relationships there is often an imbalance in power between the couple. All of the bank accounts or assets might be in the name of only one spouse and/or that same spouse might have the higher paying (or only) job which generates the income upon which the couple (and their children if they have any) expect to live.
    • Under the family law system there are special procedures and laws which are designed to even up these imbalances. The system gives to the weaker spouse the means to combat attempts by the empowered spouse to hide assets or starve the other spouse out of the money and resources necessary to both run their case and continue to feed and house themselves whilst the final property division exercise is being worked out.
    • Two recent family court decisions however have now ruled that until it is actually proved that the parties were in a de facto marital relationship, none of the protections mentioned above are available.
    • In many situations the fact of the previous existence of a de facto relationship is as plain as day and consequently little if any trouble arises for those couples.
    • In other relationships however, degrees of separation during the relationship such as the operation of separate bank accounts and even part-time occupancy of separate houses leaves it open for an unscrupulous spouse to argue that there was never any full de facto relationship in the first place and;
    • It is almost always these unscrupulous types of ex-spouse who typically have held on to the power and control of all of the assets and income during the relationship and are in the highest risk category of trying to hide or starve the other spouse out from those assets post separation. With no controls in place, these unscrupulous types are also potentially free to spend down or destroy the assets which can often happen out of pure spite and;
    • With it sometimes taking up to 1-2 years to get a case to trial so that the existence (or not) of a de facto marital relationship can be proved, these unscrupulous types have plenty of time to reek havoc on their former partners such that by the time the matter is actually tried there is potentially no assets left to divide.

    All however is not lost. A little known old (and relatively low level) law which has previously been used to prevent people from abusing the processes of the court, is currently being quickly dusted off and given an injection of steroids as a potential temporary fix. So far the courts have acknowledged in one case that the law can be used to make injunctions (which is a special type of court order) to stop an unscrupulous spouse from destroying or dissipating assets. In another recent case it has been suggested that the law can be used to force the “have” spouse to make money available for the “have not” spouse to fund her legal representation to even up the fight but that case settled (in favour of the “have not” spouse) and so the court’s attitude to this further step is still unknown.

    It is certain that the problem with the 2009 law can be fixed with a change to its drafting but that could take many months if not years to resolve and so in the meantime our “little engine that could” law is there to help but, if you are in a de facto marital relationship and the other spouse is insistent on controlling all of the assets, the best protection by far will be to:

    • make sure that you have excellent documentation (and if necessary witnesses as well) to be able to prove unequivocally that you are in a de facto relationship with the other person.
    • better still, there is now the means under the Queensland system for de facto couples to register their union with the Registrar of Births Deaths and Marriages. Under the legislation, once the relationship is registered, the existence of the de facto marital relationship is immediately proved; and/or
    • just get married!

     

    Michael Zande is a Queensland Law Society accredited family law specialist with over 25 years experience in the field. He is the principal at Zande Law Solicitors, Suite 7, Norwinn Centre, 15 Discovery Drive, North Lakes. To contact Michael for advice phone 3385 0999.

    The information in this article is merely a guide and is not a full explanation of the law. This firm cannot take responsibility for any action readers take based on this information. When making decisions that could affect your legal rights, please contact us for professional advice.