Going through a divorce means having to divide a martial estate that was acquired during one’s marriage. While many people become hyper-focused on assets during this time, they also need to think about debts.
The debts from one’s marriage can have a significant impact on each spouse’s financial future. As such, both parties must ensure that they understand how the division of debts can affect them so they can make decisions in their best interests.
What are options for handling marital debts?
Some marital debts may be attached to assets that are divided. For example, one’s home may have a mortgage or a vehicle may have a car payment. In those cases, each debt may be assigned to the person who gets the asset in the divorce.
Mutual debts will also generally need to be assigned to a person. Yet, even when the court orders one party to pay for a specific debt, creditors don’t have to abide by that order because they aren’t a part of the civil divorce process.
To this end, the downside to dividing debt between the parties like this is that both people can have a negative mark on their credit report if the assigned person doesn’t pay any particular debt on time. This could mean that the credit worthiness of the person who isn’t assigned to the debt can suffer.
Thankfully, it’s sometimes possible to avoid the risk of harm to one’s credit report. If there’s enough available in the marital estate to pay off the debts, neither party would have to worry about them post-divorce. Alternatively, asking a creditor to honor the transfer of a debt to one person’s name alone can protect each spouse’s financial situation more completely moving forward.
Ultimately, determining what happens to debts during property division is a process unique to each couple’s circumstances. Working with a legal professional who is familiar with these matters can be beneficial accordingly, because they can assist with exploring all options and clarifying the potential impacts of each pathway forward.