Divorce debt settlement helps you avoid harsh financial consequences
Throughout a marriage, spouses individually accumulate assets and debt. Because spouses are often financially dependent on each other however, complicated financial situations can arise when a couple decides to split. Joint credit cards and mortgages are two common sources of divorce debt. After a divorce, if both spouses’ names are on an account, creditors can come after either spouse when trying to collect. Indeed, having these accounts go to collection can hurt both spouses’ credit scores. Therefore, it is important to understand the settlement process to make sure that you’re being treated fairly. Consulting an attorney can ensure that your interests are best represented throughout your divorce settlement and after.
How courts divide divorce debt varies from state to state
When a couple decides to divorce, the courts split up both their assets and their debts. Some people overlook the importance of dividing the debt, but it is an essential factor of a couple’s net worth and courts take great care to do so fairly. The court will decide which party is responsible for each bill. The court will try and balance the debts and assets to make sure the parties are given a fair settlement, meaning that if one spouse receives less debt, they may also receive fewer assets in the deal.
It is essential to know which laws will control the division of your debts upon divorce. Some states operate under community property laws, which means that, with some exceptions, all property (both real and personal) acquired during the marriage is presumed to be community property and both spouses have an equal interest in it, regardless of legal title. Complex issues can arise if separate property (property acquired prior to the marriage) is used to buy a property or pay down a mortgage. Laws and formulas used to determine and divide community property during divorce vary from state to state, making it crucial to have attorney representation in the matter. Moreover, proper estate planning during the marriage can help to avoid these difficult problems from arising.
Other states operate under equitable division laws. Equitable division does not mean that spouses will necessarily receive half of everything. Rather, the court will determine what is a fair, reasonable and equitable division of debts and assets, taking into account what each spouse brought into the marriage. Regardless of your state’s laws, your settlement may be governed by a prenuptial agreement if you signed one. Because of the complexities of the laws governing divorce, it is especially important to consult with an attorney when determining what to do with divorce debt.
Settling the debt after your divorce
Even after the court divides the assets and debts, your financial struggles may not be over. For instance, were you to file bankruptcy, you would not be excused from making spousal support (alimony) or child support payments. Indeed, familial support remains a top priority in bankruptcy proceedings. Likewise, you may remain liable on any joint accounts, even after divorce. This means that if your spouse misses a payment on a debt that has been assigned to him or her, the creditor may come after you.
Steps you can take to avoid divorce debt complications from arising
Divorce becomes more complicated when debt is involved, so it is always a good idea to work with an estate-planning attorney during your marriage that can put safeguards in place in the event that a divorce does happen. Likewise, it is important that both spouses have equal access to any financial information during the marriage and are involved in making key financial decisions.
Creditors are often willing to forgive a portion of your debt when you are involved in a divorce proceeding. If you are unable to pay the debt accumulated during a divorce, we can help. Our attorneys negotiate down divorce debt to a fraction of the amount claimed by the creditor. Contact McCarthy Law today to set up an appointment for your free consultation and case evaluation. Please note that we are a debt settlement law firm, we do not handle the actual divorce.