If you are headed for a divorce, you may be thinking more about the division of your marital assets than what will happen to your debt. But just like assets, debt is also subject to division in a divorce.
There are two kinds of debt: marital and non-marital. Marital debt is any debt you incurred together during your marriage — mortgage loans, car loans, credit cards, etc. Non-marital debt is debt that was incurred prior to the marriage or after you and your spouse separated or divorced, and belongs to whoever incurred it.
The Court has some discretion to determine the assignment of debt in a divorce. Typically, both spouses will be liable for the debt that either one of them incurs while they are married. However, a judge may consider who benefitted most from the debt and could conceivably assign the entire debt to that spouse.
When it comes to mortgage debt, it is usually best to sell the home and pay off the loan. If there are children and a move might prove detrimental to them, one spouse may be awarded the home. If this is the case, the loan should be refinanced and put in the name of the spouse keeping the home.
As for authorized user accounts, creditors typically hold the primary account holder responsible for the debt. If the primary account holder defaults on the debt, however, it could negatively impact the authorized user’s credit report. If you are listed as an authorized user on your soon-to-be ex’s credit cards, contact the creditor and asked to be removed.
Unfortunately, sometimes there is also hidden debt that is discovered during a divorce. Even if the debt is just in one spouse’s name, the other spouse may be held responsible for half the debt. Get a current credit report and scour it for hidden debt. Close joint credit card accounts and open single accounts so your ex’s credit history will not affect your credit score.
When it comes to debt and divorce, the best course of action is usually to determine how much debt you have together and make an effort to pay it off before you divorce.
When you are faced with an important life decision regarding a key family relationship, the advice and assistance of an experienced family law attorney often prove crucial to your understanding of the issues involved and your satisfaction with the ultimate outcome of your family law matter. Contact us today for your free consultation.