Divorcing couples crippled by debt - lawyer

July 9, 2015 by The Royal Gazette

Couples going through divorce proceedings are increasingly finding themselves with "overwhelming" debt problems due to the struggling real estate market.

Family lawyer Katie Richards told The Royal Gazette that the courts have dealt with growing numbers of cases where the divorcing parties are in negative equity.

"The downturn in the real estate market has produced a number of cases where the mortgage debt now significantly outstrips the value of the property," said Ms. Richards.

"For those who purchased their property at the height in 2007-08 and are divorcing now, that outstanding debt can be considerable and feel overwhelming.

"The courts unfortunately have limited powers in this regard and can only make certain defined orders.

"The court can transfer property from one party to the other but where the home is saddled with a debt considerably greater than its value, neither party realistically wants the property and the other party typically doesn’t have the funds to buy out their portion of the debt.

"The property can of course be sold by agreement of the parties but that simply crystallises the debt and leaves the parties facing crippling repayments with no assets.

"A further difficulty is that even where the court apportions the debt in some manner, the joint mortgage is usually a joint and several liability.

"This will result in each partner potentially remaining liable for the full debt if the other cannot or will not pay."

Ms Richards also said that the availability of legal aid for matrimonial matters had substantially diminished, meaning parties often struggled to afford the legal fees.

She added that more litigants were therefore acting "in person" in court that could in turn prompt greater animosity between the parties.

Over recent years the number of divorces being filed in Bermuda has decreased.

In 2002, 289 divorce cases were filed, of which 252 were granted.

In 2007, 254 divorce claims were filed with the Supreme Court, of which 240 were later granted. Between 2012 and 2014 the number of divorce claims filed has remained at around the 190 figure.

Ms Richards said: "The courts will be increasingly faced with dividing debt rather than assets in the foreseeable future." She added: "Provided that the parties are willing to be amicable and take steps which will benefit both of them in the longer term, there are often creative solutions available which can be agreed upon to avoid costly legal proceedings and prevent crystallising the debt."