What Happens to Debt in Family Law Settlements?

How Does Debt Get Shared in Family Law Settlements?

Chan & Lee


Ms Chan and Mr Lee were married for 8 years, at the beginning of which they owned nominal assets between them.[1]

By the time the couple reached the court system their net pool comprised of a $570,000 property which was subject to a mortgage of $440,000, with $92,000 owing via a deed of loan agreement to the wife’s parents, and another $30,500 owing for various cost of living expenses. The wife also retained debt of a student loan totaling $26,826. The primary judge found that financial contributions made favoured the wife being an 80/20 split. Ultimately, by the time the separated couple reached the court their liabilities outweighed their assets.

On appeal, the wife sought that the husband be responsible for the mortgage of the marital property. The court found this was “is not a sustainable position” as the husband would effectively be required to “bring property into existence that does not at present form a part of the parties pool of property”.[2]

The wife also asserted that the trial judge had made an error in ordering her to indemnify the husband as to her parents’ loan. On appeal the court held that the 100 per cent adjustment to the wife “does not warrant an indemnification in relation to debts from the relationship that exceed the pool of property where those debts are truly those of both parties”.[3]

The judge described the parties’ financial circumstances as “parlous” with the little equity in property that they had acquired during their marriage being outweighed by outstanding personal debts.[4]

You would be right to question why the parties brought their case to court with such minimal assets to distribute between the parties. A separation between two parties does not always have to result in expensive litigation. One of the contributing factors of the costs of a divorce in Australia.  To get a sense of these potential expenses, you might want to explore how much a family lawyer can cost.

At Rowan Skinner & Associates Lawyers, we consider our client’s assets and advise of the most efficient way to receive the best possible outcome for you. You can also check our latest blog about family dispute resolution as a form of separation proceedings.

If you want to discuss your property case with an expert Melbourne Family Lawyer, please contact Rowan Skinner at our office on 9995 9155.  We also service clients in Melbourne Northern Suburbs, such as Northcote, Alphington, Carlton, Fitzroy, North Fitzroy, Kew and Heidelberg.

Alternatively, if you would also like to understand how spousal maintenance is calculated in Australia check out our latest blog for more information.


[1] Chan v Lee [2022] FedCFamC1A 85.

[2] Chan v Lee [2022] FedCFamC1A 85[96].

[3] Chan v Lee [2022] FedCFamC1A 85[102].

[4] Chan v Lee [2022] FedCFamC1A 85[92].

Rowan Skinner

About Rowan Skinner

Rowan Skinner is a highly skilled family lawyer with over 35 years of experience across various legal roles and jurisdictions. Rowan specialises in resolving family law disputes such as divorce, financial settlements, child custody and domestic violence cases. Through his diverse and extensive experience, Rowan has a deep understanding of the complexities and nuances involved in family law. Rowan is a skilled negotiator and litigator who follows a compassionate and client-focused approach which prioritises helping you navigate what can be an emotional and challenging time.

Seraphinite AcceleratorOptimized by Seraphinite Accelerator
Turns on site high speed to be attractive for people and search engines.