The Debt Dilemma in Divorce

This article was originally published on BlogHer.

The four-letter word…

“Debt” is a four-letter word that nobody wants to hear, especially during a divorce. A couple going through a divorce is faced with the issue of who is responsible for paying off debt accumulated during their marriage. Some couples agree to be equally responsible for money owed and pay off their debts as soon as their finances allow, while others make arrangements where one spouse pays off the debt and, in return, receives more assets in the divorce decree. Whatever the plan may be, it’s extremely crucial to have one.

People are often unaware of the different types of debt. They equate debt with credit card bills and nothing more. It’s important to know what constitutes debt. Student loans, personal loans, medical bills, cell phone bills, utility bills, overdraft charges, automobile loans, and bank overdraft charges are all forms of debt. For example, if you or your spouse has an outstanding medical bill for a surgical procedure or hospital stay when ill, that counts as debt. Additionally, if you don’t know that your spouse has failed to pay your joint cell phone bill, that money owed doesn’t simply disappear with the wave of a magic wand. Both parties are responsible.

Don’t get caught off guard.

How can you be certain that your name isn’t on any hidden debts your spouse may have incurred? Be proactive and find out how much you owe by ordering a joint credit report from all three credit reporting agencies: Equifax, Experian, and TransUnion. Review the reports and distinguish which debt is joint and which debt falls under the individual’s name only. It is not uncommon to discover that your spouse has debt you never even knew about. Again, to be extremely clear, if your name is on an auto installment or a property mortgage, you will be held accountable for those debts even after you get divorced.

While going through the divorce process, it is important not to run up any additional debt if you can avoid doing so. Even if you trust that your spouse will not incur any more debt, you may want to cancel your joint credit card accounts just to be safe. Although you can’t undo the debt damage that may have occurred, you can end the risk of your spouse tacking on even more money to your joint credit card account.

Protect your future.

By neglecting to uncover how much debt is truly owed both jointly and individually, you run the risk of being stuck paying years of debt repayments. Protect your financial future by paying off as much debt as financially possible before filing for divorce. Be certain you are aware of all existing debt and come up with a feasible plan for paying off all money owed. Failure to do so will inevitably cause major financial problems down the road.

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