21 Dec Dividing debt in a divorce
Divorce is generally a confusing and time-consuming process. You need to make choices regarding various elements such as dividing debt, marital assets and property. One thing some divorcing couples don’t realize is that debt is considered marital property, regardless of which person incurred it. Learn about what happens to debt during divorce and what you can do to protect yourself.
How debt is treated
Any debt that is brought on after marriage and before the separation date is considered marital property. Examples of marital debt include mortgages, credit card balances, loans and tax obligations. Even if you had nothing to do with racking up the debt, you will be held liable for payments. In most cases, this does not apply to debt that is solely related to your spouse’s accounts, such as a separate credit card account opened by your spouse in his or her name only.
The court determines who has responsibility of paying bills, as well as the division of money and property. Typically, debts are divided equally, although they can balance one another in certain cases. For example, if a spouse receives more property, they might receive more debt. Keep in mind that if you have a prenuptial agreement, this will affect your settlement.
When the bills aren’t paid
Sometimes people don’t pay off their debts, either on purpose or because they can’t afford it. If your former spouse isn’t paying the debts, the creditors come after the person responsible even if both parties were originally responsible. You may find yourself being hounded by your ex’s credit card company if this happens.
What about bankruptcy?
Sometimes the financial turmoil of bankruptcy causes divorce. Other times, the debt brought on by a divorce settlement can lead to filing for bankruptcy. While this is an option, it is important for divorcing couples to remember that declaring bankruptcy doesn’t end your responsibility for alimony or child support.
The best-case scenario is that you are able to clear your debt either before or during your divorce. If it is possible for you to take action in clearing your debt, it will save you from extra complexity in the future. Debt will keep you connected to your ex when you’re trying to be separated.
Divorce is complicated enough on its own. Speaking with a family law attorney can help you make sense of the process and figure out what to do in regards to dividing physical property, monetary assets and debt.