Nothing is easy about divorce. Apart from the emotions involved, several challenging decisions come into play when partners part their ways.
Whether one wishes to accept it or not, divorces have become quite common. According to the latest research, 90% of people marry by the time they turn 50, and 45% of married couples separate down the road.
During their time together, married couples gather assets and create debt. Knowing how to handle finances post-divorce help people keep catastrophes at bay. Mentioned below are five things to know no matter what. Please check them out now.
1. How the Equitable Distribution State Manages Debt
The experts working for best debt management companies said most states comply with ‘equitable distribution’. In those states, the family court judge decides what is equitable and distributes the debts and assets accordingly. Each spouse legally claims what they believe is an equitable amount of their debts and assets.
Debts and assets may not be categorised using a similar formula in each case. For example, one spouse could have more debts than the assets or vice versa.
2. Lender Contracts Stay in Place Despite Divorce
Lenders do not care about divorces. One or both of the spouses sign a loan agreement for borrowing money. Divorces do not impact that obligation.
Creditors do not know whether or not a person has gotten divorced because such information does not appear like the credit report. Changing the address or name cannot get one off the hook for repaying outstanding balances.
3. Student Debts are not Shared in Certain Situations
While a car loan, mortgage, and credit card debt can be shared, student debt is quite different. If a person racked up student loans before getting married, that debt remains his/her sole liability. The only way a student debt transfers is if it was somehow specified in the prenuptial agreement.
4. Joint Responsibility for Unsecured Debts
According to the professionals at the best debt management companies, unsecured debt such as credit cards is the economic responsibility of both parties in the divorce. If the spouses decide not to pay it, they will see a decrease in their credit scores.
During the divorce, when dividing assets, it is a great idea to consider utilising some of the proceeds to eliminate some of the joint credit card debt.
5. Creditors Can Come After Due to Ex-Spouse’s Accounts
Creditors generally pursue the other spouse for payment on the delinquent accounts. This happens even when the innocent spouse’s name is not stated on the account. This also happens even when the spouses are not married anymore.
If a person wishes to live in community property, the best way to counteract this is to incorporate a provision in the divorce decree that indemnifies him/her on any account in their ex-spouse’s account. Besides repayment, he/she will also have to manage late fees and collection costs.
Another choice is to pay the ex-spouse’s debt and keep the payment proof. Then, one can contact the family court and ask them to help him/her get reimbursement.
If the divorces are relatively civil, spouses may wish to discuss refinancing the existing debt. They remove each other’s names from certain obligations, leaving only one of them responsible for those payments. This strategy makes moving on seamless.
