A divorce can represent a stressful time in terms of both emotional and financial turmoil. There are numerous details that might seem insignificant at first glance but could represent a large headache in the future. For example, a couple might share a credit card that was used for household purchases during the marriage. Who will ultimately be responsible for paying back that debt?
Debt division can be a challenging task to accomplish in the divorce process, here are three tips to remember:
- Examine your debt prior to the divorce: When divorce becomes a reality, it is likely that emotions are running high. It is wise, however, to look at debt before the legal process officially starts. Your goal should be to resolve as many marital debts as possible. Whether you pay the debt off or put the debt wholly in one spouse’s name, these discussions should start early.
- Eliminate any joint accounts: Even if your ex has accepted debt responsibility for a shared credit card, it is wise to take steps to remove your name from the debt entirely. Your ex can transfer the balance to his or her card or you can both pay off the amount and close the shared card immediately.
- Watch out if your ex files for bankruptcy: It is not uncommon for divorce to lead to financial upheaval. Some recently divorced individuals feel that filing for bankruptcy is the only way to start a fresh financial future. Unfortunately, while bankruptcy can eliminate unsecured debts, if the debt is jointly held, the creditor will simply pursue the remaining debtor.
A married couple might at first worry about property division during a divorce. Dividing the house, cars and retirement funds will certainly take priority. However, it is wise to consider any personal loans, medical debt or credit card debt that has accumulated during the marriage.