What Should You Do about Marital Debt When You Are Planning a Divorce?

If you are faced with getting a divorce, your life isn’t over yet. It’s just filled with a lot of different tasks that need to be handled if you are to get on with your life with as little stress as possible. In addition to all of the paperwork that needs to be filed, finding a new place to live, figuring out who gets which assets, and changing your contact information, you’ll need to settle up the debts that you hold jointly as well as those you are individually responsible to pay. An attorney can assist you in coming up with a good plan to do so or you can attempt to figure it out on your own. Here are a few ideas to help get you started.

Dividing the Debt According to Personal Responsibility

If your divorce is amicable, you shouldn’t experience any difficulty when you divide up your marital debts. Each spouse can simply take responsibility for personal debts, and the jointly held balances can be split down the middle. If the accounts are held individually, this strategy is easy to implement. Otherwise, cash transfers from one spouse to the other might need to take place.

If the divorce isn’t a friendly one, you might have more difficulty arranging this particular strategy, especially if some of the accounts are jointly held. For example, you might not want to pay for the $800 TV that your spouse purchased using a shared credit card. It’s important to create a list of all debts so that you don’t lose track of any of them. You can even make three lists: one for you, one for your spouse, and one for the two of you together.

Trading Off the Debt

If one spouse has greater means to pay off the debts, such as a higher income level, you might want to consider trading off the debt in exchange for a higher percentage of assets. For example, the spouse who has a larger salary agrees to accept responsibility for certain debts in exchange for jointly owned assets.

Sharing the Debt Equally

The decision to share the marital debt equally might appear to be a good idea at first, particularly if your personal share is somewhat less than that of your spouse. However, this strategy can lead to potential problems that you need to be aware of before you sign on the dotted line. If your spouse decides not to make payments on the debt, then you are still responsible to pay it off. Moreover, your credit score could drop as the result of late payments, defaulted loans, or failure to pay off credit card debts. If you decide to share your debts equally, the best plan is to simply pay them off prior to the divorce so that you can avoid any problems in the future.

Selling Off Marital Assets to Pay Off Debts in Their Entirety

Although it might not be the ideal solution, selling off marital assets to pay off debts in their entirety is still a good option. Instead of dividing your joint possessions into two equal piles, you can sell some or all of them to pay off the debts that the two of you share. You might not have enough furniture to set up your new living quarters, but at least you won’t have any debts to pay off. If you don’t have enough money to pay off all of your debts, consider paying off all of the smaller balances or the largest one. You’ll have fewer debts to divvy up either way.

Medical & Dental Bills

Unless each spouse has individual medical and dental insurance plans, the debts incurred for medical and/or dental procedures could belong to the spouse listed as the responsible party. If the debts aren’t yours but you are the individual listed as being financially responsible, you’ll want to make arrangements to have these debts paid in full by your spouse prior to having the divorce finalized.

Close Joint Credit Card Accounts

Don’t forget about your credit cards! You’ll need to close joint credit card accounts in order to avoid having your ex-spouse create new debts that you are responsible for jointly. You will have to pay off any balance that is due on the credit card before you will be able to close the account.

Protect Your Financial Interest and Credit Score

If you suspect that your spouse hasn’t been entirely honest about debts that might be held in both names, you should obtain a credit report. It will list all of the debts in your name along with the starting amounts and current balances. Don’t take a chance that might end up affecting your credit history negatively in the future. Make the effort to find out how much each of you owe individually as well as jointly so you can be prepared to divide marital assets and debts fairly.

 What You Should Do about Marital Debts When Getting a Divorce

It’s important to look into all of your debts obtained as a married couple before you finalize the divorce. You’ll want to ensure that a strategy is in place for paying off these debts, so that your credit score isn’t affected negatively as well as so that you don’t end up without enough money to pay your new bills. Here are the strategies that you can use to handle your marital debts responsibly:

.   Divide up responsibility for your marital debts according to individual responsibility

.   Trade off debts in exchange for a higher percentage of assets

.   Share the marital debt equally in a 50-50 split

.   Sell off marital assets and use the proceeds to pay off debts

.   Make arrangements to have medical debts paid by the spouse who incurred them

.   Close joint credit card accounts

.   Obtain a credit report to check current balances

If you have any questions about debt and divorce, call the Peter Van Aulen a NJ divorce lawyer at (201) 845-7400 for a free consultation.

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Peter Van Aulen is certified by the New Jersey Supreme Court as a Matrimonial Attorney.

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