Valuing liabilities
In a property settlement it is important to work out the value of both assets and liabilities. Liabilities is another term used for debts that people owe. Working out how much debt both you and your ex-partner owe is an important step when going through a property settlement.
Video: How to value liabilities
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This information will help you to understand:
- what liabilities are
- how you can work out how much debt you and your ex-partner owe
- how loans from family are valued, and
- how loans from family may be dealt with in a property settlement.
What are liabilities?
When the law talks about liabilities, this is a term for all debts that people owe. Some examples of different types of debts includes home loans, credit cards, personal loans, student loans and tax debts.
How can I work out how much debt I owe?
To work out how much debt you owe, a good place to start is to look at the most recent statement from the lender. In most cases, the most recent statement from the lender will give you the information you need. However, if you are unsure about the exact amount owing or have any other queries you should contact the lender directly.
Some examples where you can use the statement from the lender to work out how much debt you owe include:
- home loan statement
- credit card statement
- personal loan statement, and
- business loan statement.
How can I work out how much debt my ex-partner owes?
As part of the process of working out how property will be divided following separation, both you and your ex-partner have an ongoing duty to disclose information about your finances. This means a duty to share financial information with each other.
To fulfill this duty, updated information about debts will need to be shared each time there are significant changes to your finances and before every court date, if you have a property case in the Family Court.
How are loans from family valued?
Unsecured loans from friends and family members are a bit harder to value and include in the asset pool. Unsecured means that the loan was offered without collateral, like a house or car, that could be sold to repay the debt.
Loans from family are often based on a verbal promise to repay and are unlikely to be enforced. They rely on the trust and relationship between the family members.
When an unsecured loan from family may be included in the asset pool
Unsecured loans from family might be included in the asset pool if:
- there was a clear written contract signed by the lender and the person borrowing
- there are terms of repayment specified, such as fortnightly or monthly
- interest is added to the principal amount, and
- there is a history of regular repayments being made.
When an unsecured loan is not included in the asset pool
If an unsecured loan is not included in the asset pool, you may be able to have the amount taken into account as a contribution you made to the asset pool.
You should get legal advice about this scenario as it is complex.
Reviewed: 30 November 2020