How Are Debts Divided in a Malaysian Divorce?

Does the court look at debts too?

Yes. The court looks at what you owe as well as what you own. Under Section 76 of the Law Reform (Marriage and Divorce) Act 1976 (LRA 1976), when dividing matrimonial property, the court must consider any debts either spouse took on for your joint benefit.

It looks at the full picture: mortgages, car loans, credit card balances and personal loans taken during the marriage.

Joint debts

A joint debt is one you are both legally responsible for, such as a housing loan in both names. Both of you owe the bank, whatever the court orders between you.

So if the court orders your spouse to pay a joint loan and they stop, the bank can still come after you. Your lawyer can help you reduce this risk, for example by refinancing the loan into one name.

Housing loans

The family home is often the biggest asset and the biggest debt. If one spouse keeps the home, the court usually orders that spouse to take over the loan. The other may be released through refinancing.

If neither of you can afford the loan alone, the court may order the home sold. The sale money pays off the loan first. What is left is divided using the Section 76 factors.

Credit card debts

A card in one spouse’s name is generally that spouse’s debt. But if the spending was for the household, the court may take it into account when dividing other assets.

With supplementary cards, the main cardholder usually owes the bank for all charges. The court may adjust the division to reflect spending by the other spouse on that card.

Personal loans

The court looks at what the loan was for. A loan for family costs, or to improve the family property, is more likely to be treated as shared.

A loan for purely personal reasons, such as gambling or an affair, may be left with the spouse who took it.

Business debts

If a spouse runs a business, its debts can matter. A business loan that one spouse personally stood surety for is that spouse’s liability.

If the business counts as a matrimonial asset, its debts lower its value. For division, the court uses its fair value minus what it owes.

How to protect yourself

List every debt: housing loans, car loans, credit cards, personal loans and any loan either of you stood surety for. The financial disclosure process requires both sides to declare all their liabilities.

If you think your spouse is hiding debts or taking on new ones before the divorce ends, tell your lawyer straight away. Courts take a dim view of a spouse who runs up debts to shrink what is left to divide.

Looking to engage a divorce lawyer? If you are unsure which debts you could be left with after the divorce, request independent lawyer contact via WhatsApp: Request Lawyer Contact. For general information, use our guides and tools.