The end of a marriage is a tricky time for some spouses. Couples not only transition from a married life to a single life, but they also oftentimes go from a two-income lifestyle to a single income. Finances can be a huge issue for divorcing spouses, and ensuring your financial wellbeing post-divorce is an essential task to complete. This means understanding the property division process and how it could impact the settlement reached in your dissolution.
While assets and property are emphasized in the property division phase of divorce, this is not the only type of finances that should be noted. Debts can be a huge factor in divorce, and even if you are not the initial owner of a debt, this debt could be assumed to be marital property. Thus, you could face some debt liability when it comes to your ex-spouse’s student loans, car loan and credit card debts.
Depending on the type of debt, when the debt was acquired and what the agreement with a creditor looked like, a debt that looks like it was assumed by one spouse could have been assumed by both spouses. If this is the case in your marriage and now your divorce process, it is important to understand what could be done to protect yourself from certain debts.
If a debt now has the label of marital property, it is still possible to reach an agreement to avoid responsibility for your ex-spouse’s debts. Aside from having a prenuptial or postnuptial agreement during the union, spouses could negotiate a settlement, whether it is through mediation, collaboration or arbitration, that details how debts will be divided. It is important to note, however, that a creditor could still go after both spouses in the event of a missed payment. Even if a divorce settlement says you are not jointly liable for a debt, this does not always change how a lender will treat or label a debt.
Much like there are challenges when dividing assets and property in a divorce, it is also difficult to address debts in the process. If you are dealing with property division issues during dissolution, it is important to understand ways to resolve them while also protecting your rights during this process.
Source: Clearpoint.org, “What Happens to Your Debt After a Divorce?” Louis DeNicola, Feb. 3, 2017