Marital Debt – What You Need to Know When Getting a Divorce
During a divorce, the division of assets – whether financial or property often take top billing. You’re probably also weighing options to decide whether you will be able to resolve differences and come to an agreement on how to split up your valuable possessions. But there’s one area that doesn’t always get center stage but could be more important than your assets. And that’s the division of debt.
Why division of debt is so important
Debt has the potential to be as debilitating as not being able to negotiate a reasonable alimony. Just as a dependent partner can struggle if the spousal support or child support agreed to is not adequate, not having clarity or not paying adequate attention to how debt is divided can be dangerous. Even if you do earn an income of your own, after a divorce the money you need to run a separate household on a single income does go up.
Taking on too much of the debt burden, or making assumptions that your spouse will continue to make the payments as they did before is risky. Even the most amicable of divorces can deteriorate into less than attractive arguments that might see your estranged spouse refusing to make any payments on debt that’s in your name, even if it was for a joint asset.
Know your options
The ability to manage debt after the divorce depends on numerous factors, and this must be taken into consideration while working out an agreement. What most experts on divorce and your attorneys will suggest is that you try and settle all marital debt before heading into a divorce. The other option is to leave it to negotiations and discussions with your attorneys and soon to be ex during the mediation process. The other route is to leave it to the divorce court to decide. In case a prenuptial agreement is in play, this will direct the course of events in a very definitive manner.
Divorce mediation for debt division
If settling all debt before you divorce your spouse isn’t a possibility, know this – courts will only take decisions on joint debt. Anything that is taken out on only one of your names is left to you to negotiate out of court.
How divorce courts divide up debt
Depending on which state you are in, the system varies. For instances, in some states the debt as well as assets you had going into the marriage will be factored in. Others might divide the debt equally between both partners. Alternatively, if one spouse gets more of the property they may also be given more of the debt to handle.
In community property states, everything is divided equally – even debt. And this is true even if you were unaware of debt racked up by your spouse. Prevent nasty altercations with creditors by ensuring full financial disclosure during the mediation and negotiation phase. Request copies of credit reports and list out all accounts and credit cards and any debt with clear instructions on who will service which debt and how much.
If any property like a car or home, which is held jointly and was bought with a loan in both your names, is being moved to only your partner’s name, be sure the debt also reflects the change. If you don’t own the property, you shouldn’t own the burden of having your name on the debt even if you have agreed he/she will pay for it.
Getting divorced in California can be complicated. Download our free eBook, 18 Important Things to Know About California Divorce to educate yourself on the process.
They say time is the greatest healer and the wounds of your failed marriage will also get healed with time. Sound and professional advice from an Orange Country divorce attorney…
Many people who go through divorce look back at a later time and recount their shock or surprise. They had no idea that their spouse was considering divorce until they…