Couples who are going through a divorce know they have to deal with property division, but they often think that this involves only their assets. That’s not how it works. Property division involves having to split the assets and the debts that were amassed during the marriage. Both of these together determine a couple’s net worth.
Marital debts are an important consideration during this process because they can have a major impact on each party’s future. These debts don’t just go away because the couple divorces. Instead, the creditors can continue to pursue collection actions against both parties even after the divorce.
What debts need to be considered?
Marital debt typically refers to all debts acquired during the marriage, even if there’s only one person’s name on the account. This includes credit cards, medical bills, personal loans, mortgages, business debt, vehicle loans and tax obligations.
Some marital debts are related to specific assets. For example, the spouse who keeps a vehicle will likely assume responsibility for the vehicle loan. The consideration at this point is getting the finance company to change the account to an individual one instead of joint one, but that’s not always easy.
How can debts be handled?
Debts can be paid off if there’s enough money in the marital estate to do so. However, this may mean liquidating assets. If that’s not possible, both parties may continue to be held responsible for the balance, even if the court orders one person to pay the specific debt. This is because the creditor isn’t part of the divorce, so they aren’t bound by the court order. An ex failing to pay the bills they’re assigned in the divorce could mean their spouse’s credit takes a negative hit.
Because the divorce process is often emotionally charged, it is crucial to have sound legal guidance to help make the best decisions on property and other matters.