Divorce is challenging for a variety of reasons. The legal aspect of divorce is primarily concentrated on the division of assets and debts. Divorce isn't just emotionally costly, but it can be financially expensive, too.
Knowing the essential divorce rules will keep you from going astray. Find out about the state rules, canceling any joint credit cards, and more by reading this article. When you understand the seven basics of debt and divorce, you'll be able to sleep a little easier.
1The Rules Vary From State To State
In some states, the name on the debt is the one who's responsible for it. In others, the debts are held jointly, regardless of whose name is on the account. Consult a divorce attorney to learn the laws in your state.
2Joint Cards Equal Joint Debts
If both names are on the card, both parties are usually equally responsible. It doesn't matter if you never used the card or if your spouse charged $10,000. After the time of separation, any additional credit card purchases or cash advances are the sole responsibility of the person that initiated them. The time at which separation is considered to have occurred depends on your state of residence.
3Cancel Any Joint Credit Cards
Cancel any joint credit cards during the divorce process. The last thing you want to deal with is your soon-to-be-ex charging the card or taking out a large cash advance. Before canceling any card, be certain that you have enough money or other credit cards to live on.
4The Court Doesn't Affect Creditors
If your name is on the account, it doesn't matter to your creditors what the court decides. If your name is on the credit card, car loan, mortgage, or any other debt, you are still liable. This means that your ex's failure to make the loan payment can negatively affect your credit.
If your ex is responsible for the debt, you can then sue your ex for not honoring the agreement, but you can also still be sued for the debt. It can be a big mess. But going back to court is always an option.
5Convert Accounts And Pay Off Debts
Pay off debts or convert joint accounts to individual accounts. This will make the divorce process cleaner and easier. If you can't do this, monitor your joint accounts and keep careful records.
6Sell Or Refinance Your Home
The more people there are who can be held responsible for the mortgage payment, the happier the banker will be. It will be necessary to either sell the home or refinance the home to remove either party from the loan. This is commonly the largest debt a married couple will have and often creates the most drama during a divorce. The parent who has physical custody of the children will often take possession of the home.
If one of you has sufficient income and credit and if there is enough equity in the home, refinancing is a possible solution to this commonly sticky situation. In most cases, selling the property is the easiest way to relieve mortgage debt. Both parties are then free of debt and responsible for their own financial future.
7Beware Of Signing A Quitclaim Deed
This deed exactly does what it says. It allows one party to give up all claims to a piece of real estate. It does not absolve one from the responsibility of ensuring that the mortgage gets paid.
You'll lose any equity in the property. You will also not be able to use the property. But you still have all the responsibility for the mortgage.
Divorce is hard in many ways, including financially. The handling of debts during the divorce process depends on the state in which you reside. A good divorce attorney can help ensure that you emerge from the divorce in the best possible financial situation.