Dividing Debt during Divorce

Financial settlements and division of assets have to be undertaken according to the legal guidelines and the demands made by the spouse who has received the divorce papers. An aspect that people do not know too much about but is very much a part of many divorces is division of debt.

Debt Division and Divorce

Money is a tricky issue even at the best of times. When it comes to divorce, money can be one of the most difficult issues to sort out. It is a combination of ego and greed that can make divorce cases turn into ugly battles. Debt, too, becomes a part of the scheme of things and just as partners may be entitled to a share in property, they are also liable to share debts incurred in common.

A divorcing couple usually decides matters related to debt division on their own. If two warring partners are unable to reach an agreement, the court can take matters into its own hands and decide the issue. Different states in different countries have a unique set of guidelines pertaining to debt division. Broadly, debt division is decided based on whether it is community property or equitable distribution.

Community property is either owned by both spouses equally or separately by one or the other of the spouses. Property is divided during divorce in the same manner. Debt division, too, usually follows the guidelines of property division.

Many states follow the code of equitable distribution. This is a standard rule which defines that any assets and earning accumulated during marriage, have to be divided equitably, between couples in the event of a divorce. Debt division, in such cases, is different from the above scenario.

Helpful Tips

Debt division can end up being terribly difficult and it is useful if couples have a broad outline of how best to approach it. To begin with, it is important to consult an attorney about divorce laws in the state of residence. An understanding of debt division is important. An expert should be able to give a couple, advice on the best way that debt can be split.

It is important to approach debt division in a systematic manner. For this, a couple should make a complete list of al debts, both joint and separate. The debt details like name of the creditor, account number and balance owed should be clearly stated. Debts incurred before marriage, will remain with the spouse who had originally incurred it.

Some debts have a higher priority than others and should, therefore, be on top of the debt list. Taxes should be paid on a priority basis to prevent further fines and penalties. The same goes for rent or utility and mortgage bills. Usually, the person with the higher income is liable to pay a greater part of the debt. The spouse who benefits from a particular debt should undertake paying off the debt. For example, if one person keeps the car, then they can undertake to pay off the car loan.

Prolonging the process of debt division and constant bickering can end up being more expensive by way of lawyer’s fees etc. It is best that a couple try and sit across a table and sort out debts in an amicable manner. It is advisable to have a lawyer or court incorporate the debt division details, into the divorce judgement.

Managing Debt

When debt has been divided between couples by the court, it is important that each partner approach debt clearance in the best possible manner. First, the details of debt division have to be put in place so that neither party ends up shouldering the other’s responsibility. For this, it is important to furnish a copy of the judgement whenever necessary so creditors can make the necessary changes.

Clearing debt on a single income, while setting up a separate home, can be difficult. It is important to be prudent and to consult an expert when in doubt. Debt division need not turn into an ugly battle but be a fair resolution. Since both spouses enjoy the benefits of loans, they should also share the responsibility of debt in an equitable manner.