Divorce Debt: What Happens to It?

If you’re going through a divorce, you already know that you’ll need to come to an agreement with your husband about how to handle debt and be financially separate from one another. Although debt may have existed during the marriage, ideally, it won’t during the divorce. Although it’s easier said than done, paying off your debt before or during the divorce is the best scenario.

Throughout a marriage, your financial lives frequently become entangled. Your financial assets and debts or liabilities are included in this. The allocation of each and the associated obligations will be part of the divorce settlement. The following measures are crucial to take during the process.

List everything you need

Make a list of your debts to start. Liabilities include the following:

• Mortgage
• Credit cards
• Auto loans
• Student loans
• Personal loans
• Legal fees
• Tax debt
• Any other debts, including loans from family members

Determine who is responsible

It’s simpler to divide some debts than others. The student is often responsible for paying off student loan debt. The person who acquires car ownership may also undertake an auto loan.

It’s harder to get out of credit card debt. Although some cards have joint liability, many of us also use our cards to pay for family-wide expenses. In some situations, dividing those debts could be a significant financial problem.

If both partners are co-signers on the credit cards, then debt incurred during a marriage is often shared by both. In states with community property, both parties are liable for debt incurred by one partner.

Decide when the deadline is

If your obligations increase, it will be nearly impossible to divide them. Decide on a deadline by which no additional joint debt will be incurred. This is probably the split date (physical or legal). balances of the Notes as of that time.

After a divorce, the spouse who used the credit card to make purchases is responsible for any debt that has been built up. But you can eliminate any possibility of a disagreement by using different cards.

Close your joint credit card accounts if at all possible. Closing joint accounts can prevent your ex-spouse from accruing debt in your name. After your divorce, please get a new credit card and use it for your spending. This will keep the debt you racked up while you were still married separate from your non-marital debt.

Get your name at the least taken off any joint accounts your husband will continue using. This should stop your obligation for any future debts incurred on those accounts by your husband, but it won’t eliminate your accountability for debts accrued up until that moment. You should cancel your spouse’s authorization to sign on to any accounts you have in your name. Maintain thorough records of your charges.

Even if you disagree on responsibility for a debt, continue to make all minimum payments on credit card accounts that bear your name. If you don’t do this, it could hurt your credit score and hurt your credit history.

Decide when the deadline is

There are numerous ways to manage or eliminate joint credit card debt.

• Accept to cancel the joint cards and move some of the typical debt to individual cards.
• Decide to pay off all or a portion of the debt using joint savings.
• Accept the offer to sell a car or other item and utilize the proceeds to settle your debts.
• Accept the usage of a home equity line of credit in a jointly owned property.

One person can also agree to take on payments toward credit card debt in exchange for keeping the car or another valuable item. Equalization payments, a particular kind of offset, could be covered by your divorce settlement.

Consider filing for bankruptcy if your debt feels unmanageable. To avoid sharing debt if you are still married, you should file jointly. Payments for a child or spousal support remain unchanged after filing for bankruptcy. Speak with a bankruptcy lawyer (opens in new tab).

Make sure you protect yourself

Request a copy of your credit report (opens in a new window). To ensure no surprises, compare your list of debts to your official credit report. You should also ensure that any obligations that haven’t been fully paid off are assigned to either spouse.

Even if your husband agrees to pay for any remaining debt, you can still be responsible after the official divorce. Your creditors may ask you to pay the total amount of the debt, plus interest and penalties if your ex declares bankruptcy or does not pay the debts. Your contracts with your lenders do not change legally due to your divorce decree, an agreement you and your ex-spouse have with the court.

Strive to avoid having any joint debt when you divorce. You release yourself from responsibility for your partner’s debts by either paying off the standard cards jointly or dividing the debt on common cards and transferring it to cards in individual names.