When couples decide to divorce, financial matters often come to the forefront. Debt, like assets, needs to be divided between the parties involved. While the process can be complex, knowing your options can help alleviate some of the stress.
Typically, debt acquired during the marriage is considered marital property. However, debt acquired before the marriage is generally regarded as separate and remains the responsibility of the individual who incurred it.
Dividing debt equally
One common approach to handling debt during a divorce is to divide it equally between both parties. This could mean that each person is responsible for paying off half of the marital debt, regardless of whose name is on the account.
Another consideration is to determine who was responsible for accumulating the debt. If one party went on a shopping spree, it may be fair for them to take on that debt after the divorce. This method often requires thorough documentation.
Take debt in exchange for assets
One party may assume more debt in exchange for a more significant share of the marital assets. For example, one person could take on a larger portion of a joint credit card debt while receiving the family car or home. Weighing the long-term financial implications carefully is essential.
Selling assets to pay off debt
Selling joint assets to pay off their marital debt can provide both parties with a clean financial slate. Creditors don’t have to abide by the divorce order, so they can still hold both parties liable for joint debts. Being able to pay those debts removes the chance that either party will have to deal with a negative credit report because the other didn’t pay their share.
Understanding the options can help you determine how to proceed. Working with someone who’s familiar with these matters can help you stick to logical decisions instead of emotional ones.