de facto laws

Inherited Debt

You can inherit debt in a number of ways in this day & age. One common way is through your relationship & this is often called sexually transmitted debt. Sexually transmitted debt can arise if you guarantee a loan for your de facto partner. According to de facto laws, inherited debt commonly arises when one party incurs debts during a de facto relationship for things like not paying taxes, gambling or failed business investments. The other party to the relationship becomes liable for a share of those debts.

de facto lawsAccording to de facto laws, “inherited or sexually transmitted debt” is when you become liable for your partner’s debt as a result of your de-facto relationship status, rather than a conscious knowledge or acceptance of the debt.

The general position in de facto law proceedings is that if you cant prove “waste” or the debt was not enforced or was unreasonably incurred, then debts which come to pass during the relationship are shared. This is because a de facto relationship is seen as an economic partnership. In the same way you have de facto rights to property you also have a responsibility for debts incurred during the relationship.

In certain circumstances, this can extend to one party becoming liable for the others debts even if incurred after separation. This is because debts usually “come off the top” of the pool of assets prior to deciding how the remaining assets should be allocated.

It is notoriously difficult to prove any of the exceptions listed above. It must be a financial loss resulting from a loss in relationship assets, or a party’s reckless, negligent or wanton actions, which have effectively reduced the value of relationship assets. Ignorance is no excuse.

Even if you were not aware your ex partners incurred the debt, a court may still consider it reasonable. If your partner is asking you to sign as a guarantor for a loan for a loan for them, do not sign anything until you have taken legal advice & understand the ramifications.

De facto asset protection in the form of binding financial agreements can limit one parties exposure to the debts of the other party.

Remember, the information contained on the site does not constitute legal advice. If you think you need legal advice you should contact an Accredited Family Law Specialist.

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