Debt During Divorce: Will It Matter?
Debt becomes a more complicated issue to deal with when you are right in the middle of a divorce. You may be honest about what you owe, but if you have a spouse who has been secretive, the assets that you are about to divide might just end up paying a debt you don’t owe. On debt during a divorce, it is best to consult your lawyer about how you should deal with it. Your attorney will help you decide whether you should be responsible for debt during the divorce when you are unaware of it to begin with.
Divorce lawyers usually associate the debt with the assets. For example, the car loan debt should be shouldered by the spouse who’s keeping the car. Sadly, there are unsecured debts that need to be settled, and these are the ones that become harder to deal with. But any experienced divorce lawyer will advise you three options when dealing with debt during the divorce. Either one of these can be the solution to your problems.
• Agree to pay off all the debts.
If you have cash, or you have the property that you can sell for cash, then the best option to take is to agree to pay off all the unsecured debts before the problem worsens. Sometimes, the best way to resolve debt issues is to work on it together. Sadly, this may be easier said than done. For couples who are going through a divorce, cooperation might not be easy to provide. If it helps, the couple can meet with a credit consultant to deal with the money matters before the assets become liabilities.
• Agree to take on the responsibility to pay off the debt and get a conjugal asset for it.
If you assume the responsibility of the debt, then you should have an idea how exactly you will be able to pay it off. You may decide to liquidate an asset that you are getting the divorce for cash and pay off the debt. Or you could also choose to make adjustments in your lifestyle to make repayment of the debts possible. If you or your spouse decides to pay off the debt on your behalf, be warned that you can be in a very vulnerable position. Make sure to talk to your lawyer about this for indemnity clauses could not protect you from third party complaints.
• Agree to be equally responsible for the debt.
This is an option, but this may potentially be the worst one to take. If you decide to take on the equal responsibility to pay off the debt, you have to make sure that your former partner pays for his share. Moreover, you increase the extent of needing to communicate consistently with your ex-spouse, and if you are not in good terms, this may be a bit more challenging. Also, one could end up taking advantage of the other. If you can, don’t take this as an option.
Every mistake becomes an opportunity to learn what not to do the next time. Seize the opportunity to put an end to a past heartache and pay off all debts as a couple right from the beginning. Put back your financial security on the right track.