When people think about a divorce and the property division process that comes with it, they often think about their assets. They may not realize that shared debts also have to be managed before a divorce can be finalized. Shared debts can include things like home equity loans, mortgages, medical bills, personal loans or credit cards.
When you go through a divorce, your property division order may assign each debt to a specific person. Despite that assignment, creditors don’t have to abide by it. They can still hold both parties liable for debts that have not been transferred formally to you or your spouse alone. This means they can still hold either party accountable if the assigned party doesn’t pay. This is because divorce is a private civil matter that a creditor isn’t a party to.
How can you prevent complications?
It’s not always easy to prevent complications that come with shared debts during a divorce. One of the easiest ways is to use marital assets to pay the debts off prior to the divorce. The debts won’t be part of the property division process since they’re paid off.
Another option is to have each party refinance their assigned debts into their name only. This can be tricky for some debts because creditors aren’t required to allow this to occur. Some creditors may decline a refinance because the assigned person doesn’t have enough creditworthiness to qualify alone.
The property division process is only one thing that you’ll have to handle as part of your divorce. You may also have child custody, financial support and other matters to take care of. It’s beneficial to have a legal professional on your side who can review the options with you and help you to determine how to process in a way that’s in your best interests accordingly.