Separation rarely divides debts as neatly as it divides a bank balance. There might be a credit card in both names, a car loan in one name for a car the other person drives, a personal loan that paid for a renovation, and buy now pay later accounts nobody has looked at in months. Meanwhile the mortgage still needs paying, often on one income.
This guide explains what happens to joint debts when you separate, how to protect your credit file while things are being sorted out, when rolling debts into a home loan refinance genuinely helps, and what it really costs. If you are struggling to make repayments right now, skip to asking for hardship help first.
1. Start with a full list of debts
Before anyone can sensibly talk about consolidation, you need the full picture. The Attorney-General's Department's guide for separating couples suggests making a list of everything you and your former partner own, and then every debt, including debts owed against those assets. For each debt, note:
- whose name it is in (yours, theirs or both), and whether anyone is a guarantor
- whether it is secured against an asset, such as a home loan or car loan, or unsecured, such as a credit card or personal loan
- the balance, the interest rate, the minimum repayment and how long is left to run
- for credit cards, the credit limit as well as the balance
- whether the rate is fixed, and whether there are early repayment or break costs
Then get a copy of your credit report from each of the main credit reporting bodies. Moneysmart notes you can get one free every three months. It is the most reliable way to find accounts you had forgotten about, or did not know were in your name.
If you are worried about your safety: requesting a credit report usually means giving your residential address. The Attorney-General's Department's guide suggests calling the National Debt Helpline on 1800 007 007 before you request one if you are experiencing, or worried about, family or domestic violence. You can also call 1800RESPECT on 1800 737 732. Our browsing safely guide has more on keeping your research private.
2. What happens to joint debts
The most important thing to understand is that an agreement between you and your former partner does not change your contract with the lender.
- Joint loans. Moneysmart explains that you are both responsible for repaying a joint debt, and if one of you does not pay, the other must pay the full amount. That stays true after you separate, and even after you agree who will pay it.
- Joint credit cards. A card in both names makes you both responsible, and missed payments affect both credit scores. A card with a primary and secondary cardholder is different: the primary cardholder is solely responsible for the debt and can cancel the card without the other person's permission. The Attorney-General's Department suggests cancelling secondary cards attached to your account.
- Guarantees. If you guaranteed a loan for your former partner, you can still be liable if they do not pay.
Debts are part of the property settlement too. The Federal Circuit and Family Court of Australia explains that the court looks at what each of you owns and owes, individually and jointly, when it decides a property settlement.
Changing who is responsible
Responsibility for a debt generally stays with the person or people named on the credit contract, even after a property settlement. Removing someone's name usually means the lender agreeing to a new credit contract, which it will only do if the remaining borrower can afford the debt on their own. If your name does come off, get written confirmation from the lender that you no longer have any responsibility for it.
In some circumstances, a family law court can order a lender to change who is responsible for a debt, for example by removing one person from a joint debt. There are important limits: the court must not think it likely that the debt would then go unpaid, the lender must be given the chance to put its view, and the order must be necessary for the property split and fair. Talk to your family lawyer about whether that is realistic in your case. Our guide on consent orders and binding financial agreements explains how agreements are formalised.
If the lender cannot remove your name, the Attorney-General's Department suggests giving the lender a copy of your orders or agreement, asking to be told straight away if repayments are missed, checking statements regularly, and keeping an eye on your credit report.
3. Protecting your credit file
Your credit file will matter when you apply for your own home loan or refinance. According to the Office of the Australian Information Commissioner, these are the main time limits:
| Information on your credit report | How long it stays |
|---|---|
| Repayment history (whether you paid on time) | 2 years |
| Financial hardship information | 1 year |
| Credit enquiries (applications) | 5 years |
| Defaults | 5 years |
| Court judgments | 5 years |
| Serious credit infringements | 7 years |
Source: Office of the Australian Information Commissioner, What stays on a credit report, checked 30 October 2026.
In practice, the steps that protect you most are simple:
- Keep every joint debt at least at its minimum repayment, even while you are arguing about who should pay. A missed payment lands on both files.
- Close joint credit cards you no longer need once the balance is dealt with, so no new spending can be added.
- Avoid a run of credit applications. Each one is recorded as an enquiry. It is better to get advice first and apply once, to the right lender.
- Set up alerts or check statements on any debt still in your name.
Our guide to protecting your credit score during separation goes into more detail.
4. Asking for hardship help
If you cannot keep up with repayments, tell your lender as early as possible. You have a right to request financial hardship assistance from most lenders, and the Attorney-General's Department's guide lists relationship breakdown as one of the situations it is designed for. A hardship arrangement might mean lower repayments for a while, a short pause, a longer loan term or waived late fees.
- You can ask on your own. You are entitled to request a hardship arrangement even if your co-borrower does not agree or cannot be contacted.
- You can ask for privacy. If you are concerned about your safety, you can ask the lender not to tell your former partner about the arrangement.
- It is recorded, but briefly. The OAIC says financial hardship information shows next to your repayment history and is removed after one year, and credit reporting bodies cannot use it to calculate your credit score.
- Free help is available. The National Debt Helpline (1800 007 007) offers free, confidential financial counselling and can help you make the request.
If you are staying in the home and struggling with the mortgage, read who pays the mortgage after separation as well.
5. Refinancing to buy out a partner and clear debts
For many people, the cleanest way to deal with joint debts is as part of the refinance that moves the home loan into one name. When you refinance to keep the home, the new loan can sometimes be set up to:
- pay out the existing joint mortgage
- pay your former partner their share of the equity under your settlement
- pay out joint credit cards, personal loans or a car loan, so your former partner is released from them and they stop affecting your borrowing
Whether that is possible depends on the lender being satisfied you can afford the whole loan on your own income, and on the loan-to-value ratio (LVR) staying within the lender's limits. Lenders look at every debt you keep, and generally assess a credit card on its full limit rather than just the balance owed, so closing cards you do not need can make a real difference. Your consent orders or financial agreement may also say which debts are to be paid out and from what, and the refinance needs to match those terms.
See how to buy your partner out of the home loan and removing an ex from the mortgage for the step-by-step process.
6. When consolidating into a mortgage makes sense
Rolling debts into a home loan usually means a lower interest rate and one smaller repayment. But Moneysmart warns that a lower repayment over a longer term can cost more overall. Its example: a $20,000 debt at 10% over 5 years costs $25,496 in total, while the same debt at 6% over 15 years costs $30,379.
| It often makes sense when | Think twice when |
|---|---|
| You have high-interest unsecured debt, such as credit cards or personal loans | The debt would end up being repaid over 25 or 30 years |
| You need to be released from joint debts as part of the settlement | Adding the debt would push your LVR above 80% and trigger LMI |
| You can keep paying close to the old repayments, so the debt clears quickly | A fixed rate loan or car loan has break or early payout costs that outweigh the saving |
| You will close the cards and not run them up again | The underlying problem is that the budget does not balance yet |
There is also a risk that is easy to miss. Moneysmart points out that turning unsecured debt into secured debt puts the asset at risk: if you cannot repay the new loan, the lender can sell the home. Credit card debt does not put your home on the line in the same way. That is why it is worth being confident the repayments are sustainable before you consolidate.
7. The real costs
Before you consolidate, add up everything, not just the interest rate. Moneysmart suggests asking for all costs in writing. Common ones include:
- application, valuation, legal and settlement fees on the new loan
- discharge fees on the loans being paid out
- break costs on fixed rate home loans, and early payout fees on some car and personal loans
- government registration fees for the new mortgage
- LMI if the new loan is above 80% of the property's value, unless you qualify for a waiver (see LMI waivers for separated professionals)
Compare the total cost of keeping things as they are with the total cost of consolidating, over the time you realistically expect to take to repay. We do this comparison for you as part of any refinance.
8. Getting the right help
Different problems need different people:
Be careful with debt management offers. Moneysmart warns against companies that promise to clear any debt regardless of the amount, ask you to sign blank documents, rush you, or will not put all costs and the interest rate in writing. Only deal with a licensed provider, which you can check on ASIC's professional registers.
Common questions
Want a clear view of your options?
We will look at your debts, your settlement and your income, and show you the full cost of each option before you decide anything. Confidential, no cost, no obligation.
- Attorney-General's Department, Separating with debt: a guide to your legal options, May 2025 edition.
- Moneysmart (ASIC), Debt consolidation and refinancing.
- Moneysmart (ASIC), Relationships and money and Credit scores and credit reports.
- Office of the Australian Information Commissioner, What stays on a credit report? and What is financial hardship information?
- Federal Circuit and Family Court of Australia, Financial or property: overview.
Rules and caps were checked against these sources on 30 October 2026. Government schemes and lender policies change, so we confirm the current position before you apply.
Lendology
We are not just explaining the process. We arrange the actual finance: refinancing into your sole name, funding a partner buyout, or setting up a new loan independently after settlement. We work with a panel of over 60 lenders to find the one that fits your situation.
Once the legal side of your property settlement is resolved, the next step is usually a financial one. That is where we come in.
Jason and Steve also help clients with first home loans, refinancing, and investment lending at lendology.com.au.