Who pays which debts?

In a property settlement, debts are not divided on their own. They are deducted from the combined asset pool, and the net pool is then divided based on each person's contributions and future needs under section 79 of the Family Law Act 1975 (Cth) for married couples, or section 90SM for de facto couples. Your agreement or court orders then set out who is responsible for each remaining debt.

The part that catches people out is that lenders are not bound by family court orders. A joint loan stays joint and several until it is refinanced or paid out, which means the bank can pursue either of you for the entire balance. If your ex stops paying a joint debt that the orders made their responsibility, the lender can still chase you, and missed repayments can land on your credit report. Well-drafted orders deal with this by setting a refinancing deadline or including an indemnity, so there is a clear remedy if the other person does not follow through.

Some debts are usually treated as personal. HECS/HELP balances generally stay with the person who incurred them, and a credit card in one name is usually that person's responsibility, although debts run up for the benefit of the family are normally counted in the shared pool. Debts one person ran up recklessly, or after separation for their own benefit, can sometimes be left with them alone.

There are also time limits to formalise a settlement: 12 months from the date a divorce order takes effect for married couples, and 2 years from separation for de facto couples. Formalising the split through consent orders or a binding financial agreement is what makes the debt allocation enforceable between you, and transfers made under formal orders or agreements are generally exempt from transfer duty in most states when property changes hands.