Breakups happen for all sorts of reasons—perhaps a job transfer forced a difficult decision, or maybe there was an outside factor contributing to the end of the relationship. Regardless, they're hard to navigate, and if you've been sharing finances, that's an added hardship.
If you’ve been living together, things can get even more complicated. Unless your breakup is timed with the end of your lease, you will still be responsible for paying the remainder of the lease. It is even more complicated if you purchased a house or condo together.
While you may think it’s easier to go through a breakup if you aren’t married, you do not have the same protections as a married couple, though you may be facing similar problems to the financial ones caused by a divorce. Here’s how to navigate a breakup and emerge with your finances intact.
Close Your Joint Accounts
First, you need to close down any joint accounts that you shared. Unless you were married, you should have kept separate accounts, and just had a joint account for household expenses.
However, if you and your partner did combine accounts, you need to close all accounts and divide the money you contributed to a savings account fairly. Keep in mind, if you have automatic payments or direct deposits synced with those accounts, you will need to change them. This can be difficult if you are not separating amicably, but it’s a very important step in the process.
Choose Who Gets the Home
If you are renting, you will need to determine what to do about your apartment lease. For an apartment lease, you can either buy it out and split the costs or see if the landlord will let you transfer it to one person’s name for the duration of the lease.
It's important that you do not leave your name on any legally binding contracts—like rent payments—if you are no longer responsible for those payments. You also want to be sure the utilities are transferred to the name of whoever will stay in the apartment. Not doing either of these things can seriously damage your credit in the long run if your ex fails to pay the bills or lease.
If you own a home together, you may decide to sell it and split the proceeds, or one person may choose to buy the other out. This means that the person who keeps the home will refinance it in his or her name only and pay a certain amount of the equity (usually half) to the person vacating the home.
If one person wants to buy the home but cannot qualify for the mortgage on their own, then you should sell the home and split the proceeds.
Divide up Your Stuff
If you both came to the relationship with items such as furniture or pots and pans, whoever brought the items should get them. If you purchased the items together, sit down and split up the items.
If you have a difficult time discussing this rationally, you should hire a mediator to facilitate. This process is similar to what would happen if you were to file for a divorce. The mediator can help you compromise and work things out fairly.
Split up Joint Debt
If you have credit cards, car loans, or other debt together, you will need to split it up in the event of a breakup. First, decide who is responsible for what, and then have each person refinance the debt in his or her name only so that the other partner is no longer responsible for it. If you cannot refinance a loan because of poor credit, then the item attached to it should be sold and applied to the debt.
For example, the car should be sold to pay off the car loan if the loan is in both your names and one partner cannot afford to refinance it. Credit card debt needs to be divided, and all joint accounts shut down. Otherwise, you will be held responsible if your partner defaults on payments.
Finally, you will need to find a new place to live, come up with a new security deposit, and perhaps even buy furniture and other necessary household items.
You also need to begin planning your finances on your own again. This is a good time to set up a new budget that allows you to get out of debt and start working toward your financial goals.
The next time you start a new relationship, you may want to consider keeping your finances separate and operate on a shared household budget until you get married. This will make any future breakups easier to deal with.