Going through a divorce is never easy. On top of the dissolution of a partnership you thought would last forever, there’s the taxing task of dividing your assets and choosing who gets what. And when it comes to the division of debt, things get even harder.
If you and your partner are considering divorce, here are 4 things you need to know.
1. Your Assets May Be Divided Based on Your Location
Divorce laws differ from state to state, and it’s entirely possible that where you live can affect how your debts will be divided. Consult your attorney about the laws in your state. Knowing how your assets are divided may help when deciding what to keep, what to leave and what to split.
2. You Can Still Be Charged for Old Debts
Even after the divorce papers are filed, you can still feel the specter of old debts. That’s because you can still be charged for assets you either gave up a long time ago or forgot you still had. Creditors don’t care if you’re divorced or not: If an asset is still in your name, the responsibility of paying it off rests solely on you.
Before filing for divorce, make sure you know which debts are in your name and which are in your spouse’s.
3. Your Spouse’s Bad Credit Can Still Affect Yours
Joint debts are always tricky, but they can be even trickier when you’re dealing with divorce. Being a joint debt holder means you share responsibility for the debt, even if your spouse is currently in possession of the particular asset. Doesn’t sound fair, huh? We know.
If your name is still attached to a joint debt, and your spouse is consistently missing payments, it will negatively affect their credit as well as yours. Make sure you are aware of all your joint debts, and if possible negotiate who will claim sole ownership before filing for divorce.
4. Debt Management May Make Your Divorce Easier
The best way to handle a divorce with debt is to pay it off beforehand. Enrolling in a debt management program can help you and your partner combine your various unsecured debts into one more manageable monthly payment. Worried about joint debts? No problem. Both spouses can be under the same debt management program. It can be split per each spouse’s personal debts and can help both sides make their financial split much more manageable.
Debt management can reduce your monthly payments, reduce your interest rates and can reduce the time takes to pay off that debt from an average of 30 years down to 5. If you’re considering a divorce, contact us so our credit counselors can work with you to determine your best course of action.