When separating or entering into a contracting out agreement ('pre-nup'), we find that clients are often unsure about how their joint and individual debts are dealt with.

Under the Property (Relationships) Act 1976, debts are classified as either relationship debts or personal debts. Both parties are liable for relationship debts, whereas only one party is liable for their personal debts.

A relationship debt is a debt that has been incurred:

  • by the spouses or partners jointly;
  • in the course of common enterprise;
  • for the purpose of acquiring, improving or maintaining relationship property;
  • for the benefit of both spouses or partners in the course of managing the affairs of the household; or
  • for the purpose of bringing up any child of the relationship.

A personal debt is a debt that is not a relationship debt. It is possible for debts to be classified as partially relationship debts and partially personal debts.

Student loans are usually classified as personal debts, but there are circumstances where they can be held to be relationship debts.

The living allowance portion of the loan can be a relationship debt if it is used jointly, such as to meet the day-to-day expenses of the household or for the purpose of raising children. The tertiary fee portion of the loan can also be classified as a relationship debt if it was a debt incurred in the course of a common enterprise. Timing and intention are often important in determining this, and relevant factors include whether the intention was for a partner to gain a qualification for the benefit of the family, whether they then go on to utilise that qualification to the benefit of the family, how soon after the qualification is gained the parties separate and so forth.

In practical terms, the classification of a student loan debt is determined on a case-by-case basis and depends on the particular circumstances. Feel free to contact us if you have any questions about this issue.

Please note that Rainey Collins is not contracted to provide Legal Aid, other than in the Treaty of Waitangi area.  We therefore are unable to take on any Civil or Family Legal Aid work. If you require Legal Aid in those areas, you can search the list of Legal Aid lawyers on the Ministry of Justice website.