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, and 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 7 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 responsible. 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 Debt
If both names are on the card, both parties are usually equally responsible. It doesn't matter if you never used the card and 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 up the card or taking out a large cash advance. Before canceling any card, be certain you have enough money or other credit to live on.
4The Courts Don't Affect Creditors
If your name is on the account, it doesn't matter to your creditors what the court decided. If your name is on the credit card, car loan, mortgage, or any other debt, you are still liable. This means 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, so 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 responsible for the mortgage payment, the happier your banker. 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 with physical custody of the children will often take possession of the home.
If one of you has sufficient income and credit, and 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 the mortgage gets paid. You'll lose any equity in the property and any use of 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 to ensure, that you emerge from the divorce in the best possible financial situation.