How Debts Are Divided in a New Zealand Divorce

Relationship Debts vs Personal Debts

New Zealand divides debts the same way it divides assets — into relationship debts (shared equally) and separate debts (the responsibility of whoever incurred them). The classification follows Section 20 of the Property (Relationships) Act 1976, and the person who owes the debt bears the burden of proving it is a relationship debt.

A debt qualifies as a relationship debt if it was incurred:

• Jointly, or for a common enterprise the couple ran together
• To acquire, improve, or maintain relationship property — the mortgage, home renovations, repairs
• For the benefit of the household — joint utility bills, groceries, family medical costs
• For raising children of the relationship or children living as part of the household

Anything that doesn't fit these categories is a separate debt and stays with the person who took it on.

The Mortgage After Separation

The mortgage is usually the largest debt in any separation, and the rules are unforgiving. If both partners are on the mortgage, both remain jointly and severally liable to the bank for the full balance — regardless of who moves out or what any private agreement says about who will make the payments.

This means if the staying partner misses payments, the bank can pursue the departing partner for the full outstanding amount and register a default on their credit record. A verbal agreement or even a written separation agreement stating "Partner A will pay the mortgage" provides zero protection against the bank.

The departing partner is legally released only when the bank formally releases them from the loan, usually as part of refinancing into the staying partner's sole name. Until that happens, both names stay on the debt.

If neither partner can refinance alone, the house typically needs to be sold to clear the mortgage.

Student Loans: It Depends on How They Were Used

Student loans have a split classification that surprises many couples:

• Course fees only — if the loan was used strictly to pay tuition, it's generally classified as a separate debt belonging to the student
• Living costs during the relationship — student loan borrowing used for living expenses while the couple was together is a relationship debt, because those costs benefited the household

In practice, most student loans are a mix of both. The portion used for living costs during the relationship gets added to the relationship debt pool; the course fee portion stays with the borrower.

Credit Card Debt

Credit card debt follows the same classification rules. A credit card used for household groceries, family holidays, or joint purchases carries relationship debt. A card used exclusively for one partner's personal spending (their own hobbies, solo travel, individual purchases) is a separate debt.

Joint credit cards are straightforward — the debt is shared. The complication comes with individual cards. The spending partner needs to show that purchases were for the household or children, while the other partner may argue the spending was personal.

Keep statements. They're the clearest evidence of what the card was used for.

How Debts Factor into the Overall Split

Debts don't exist in isolation — they're subtracted from relationship assets to calculate net relationship property, which is what gets split 50/50.

Example: relationship assets total $600,000 (house, KiwiSaver, savings). Relationship debts total $400,000 (mortgage, joint credit cards, shared student loan portions). Net relationship property is $200,000, and each partner is entitled to $100,000.

Each partner's separate debts stay entirely their own and don't affect the shared calculation.

What Happens to Debts You Didn't Know About

If one partner secretly accumulated debt during the relationship — personal loans, credit cards, gambling debts — the classification depends on what the money was used for. Secret spending on personal consumption is a separate debt. But if the secretly borrowed money was used for household expenses (even if the other partner didn't know about the borrowing), it could be classified as a relationship debt.

The safest step upon separation is to check both partners' credit reports to surface any unknown debts. In New Zealand, you can request a free credit report from Centrix, Equifax, or illion.

If one partner used relationship funds (salary, joint savings) to pay off the other's separate debt during the relationship, the court can award compensation to rebalance the division.

Practical Steps for Debt Division

Start by listing every debt either partner holds: mortgages, personal loans, credit cards, student loans, hire purchase agreements, car finance, overdrafts. For each one, document:

• Who is named on the account (joint or sole)
• The current balance
• What the borrowing was used for (household, personal, children)
• Whether the debt existed before the relationship

This inventory is the foundation for classifying each debt and calculating net relationship property accurately.

The New Zealand Financial Split & Asset Division Guide includes a debt division audit worksheet that walks through this classification process systematically — documenting each liability, tracing its purpose, and calculating how it affects the overall property split. Getting this right before negotiating means you're dividing based on accurate numbers rather than assumptions.

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