One of the most complicated parts of divorce, particularly for those who do not have children, is the property division process. Whether a married couple has significant assets, or is of more modest means, dividing a household and joint finances is never easy. In addition to divvying up assets and property, divorcing couples also need ensure that debts are fairly separated.
Here in New Jersey, many married couples have a great deal of shared debt, including mortgages, credit cards, auto loans and even student loans. In some cases, a liability is only listed in one spouse's name, but both spouses benefited from the loan or line of credit. So, how does one handle debt during divorce?
Individuals can work with their family law attorneys to valuate their debts, determine whether they are shared or separate liabilities, and work to divide them fairly.
Often, people are wise to negotiate a plan to pay off debts during divorce rather than split them. This is because it can be difficult, or near impossible, to remove one's name from a liability. So, if your name remains on an account that is assigned to your ex in the divorce settlement, you may end up being held liable for that debt should your ex default.
When such debts are reassigned in divorce, it is important for individuals to talk to their divorce attorneys about how to help ensure they will not be held accountable by creditors to pay the debt.
It is very important for one's financial security that debt is appropriately handled during divorce. Making mistakes during this process can lead to very unfortunate consequences.
Source: Fox Business, "After Divorce, Ex Leaves Joint Debts Unpaid," Feb. 28, 2014