Where the spouse borrowed money from a third party and used that money for personal purposes and the other spouse was unaware of the loan and its use, when resolving the division of common properties during the marriage period, the Court shall determine that this is a private debt of the spouse who has borrowed the loan. Especially with the current development of forms of consumer loans, borrowers can easily get a loan with simple documents and do not need to mortgage any assets or to provide documents proving the marital status at the time of borrowing. Hence, during the marriage period, a spouse may, at his or her sole discretion, enter into multiple loans with many financial institutions or third parties to satisfy his or her personal needs. Consequently, the Court, when determining the debt of the spouses during the marriage period, shall look at the form, purpose and actual use of the loans to determine whether the purposes of the loan meet the needs of the family or not. From this, the Court shall determine whether it is a common obligation of the spousesor it is individual obligation of the borrower.
In the case of a spouse borrowing money from a third party and using that money for his or her personal purposes where the other spouse is aware of but does not object, hence the obligations arising from such borrowed money shall not be considered as a common obligation of the spouses. According to the law, if the spouses mutually agree to establish a loan agreement, the common obligations of the spouses will be established accordingly.
In addition, in
cases where a spouse borrows money from a third party, the other spouse may or may not know about such loan. However if the loan is used to fund essential needs of the family or to create a common properties of the spouses during
the marital period, and the borrowing
spouse can prove the above spending purposes or that the other spouse recognises the debt to the third
party for that purpose, the Court shall consider it as a joint debt of the spousesduring the
marital period and the spousesshall be jointly responsible for the debt. Please note
that essential needs mean ordinary needs for food, clothing, accommodation,
learning, medical care and other ordinary needs which are indispensable to the life of any individual and family[3]. Besides, the common obligations of the spouses are formed by the spouses to meet the family’s
essential needs and the private obligations are formed by a transaction
established and performed by a spouse not for meeting the essential needs of
the family[4]. Therefore, the joint obligation of the spouses in this case only arises when there is a ground to
prove that such obligation responds to
the essential needs of the family. If it
cannot be proved, it is implicit that such obligation is the private obligation
of the person directly establishing the transaction.
[3] Article 3.20 of Law on Marriage and Family 2014.
[4] Article 37.3 and Article 45.3 of the Law on Marriage and Family 2014.
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