Divorce and the Division of Debt

(U.S. Family Law and generally) Almost everyone dreams of one day meeting the person that they’ll grow old and die with. Movies like Titanic, Romeo and Juliet and Eternal Sunshine of a Spotless Mind give people hope that a perfect love exists out there for each of us. Unfortunately, individual love stories can end much more abruptly, and sadly, this can leave one or both of the spouses struggling with debt. Most people fail to realize that debt is distributed much like property after a divorce, so it’s important for every individual to recognize the consequences of marital debt prior to ending their nuptials.

Division of Debt after DivorceWhen two people get married, they basically legally become one. This means that the debt that accrue is shared. When the two get divorced, they must distribute this debt in a fair and equitable manner. A few states make the distinction between “community” and “separate” debts. Community debts would be those that each spouse had an equitable share in (ie. mortgage, car loan) while separate debts would be those which were mainly accumulated by one spouse (ie. loan for golf clubs).Community debt, in the applicable states, is divided equally amongst the spouses while they hold onto their own separate debts. In equitable distribution states, however, everything accumulated during marriage, including debt, is divided equitably between the two spouses. The majority of states in the United States handle divorces in this matter.

Consequences of Marital Debt

There are a number of consequences of marital debt after the committed relationship ends. Unfortunately, a person is often left with debts that they now have to pay on just one salary as opposed to two. Even worse, many marriages end with only one spouse having worked throughout the relationship, so the other spouse can be left with huge bills and no means of paying them.

The worst thing that can happen after a divorce, however, can occur once debts are distributed by settlement. The simple fact is that this debt distribution only works if both spouses can be trusted to take the debt seriously. If one spouse chooses not to pay on an owed debt, a creditor isn’t going to care that the marriage is over; they’re just going to want their money from one or both of the former spouses. In the end, this can destroy a person’s credit without them even realizing it.

Avoiding Debt Issues after Divorce

There are several ways to handle debt during a divorce. One of the best ways of doing so is to pay off all debt before filing for divorce. This will ensure that it’s unnecessary to keep up with whether or not an ex-spouse is making proper payments on a shared debt. In addition, divorce settlement negotiations can be used to decide who owes what, but as previously mentioned, this simply places faith in a spouse to keep up with payments.

Unfortunately, many spouses only end up thinking about the shared debt of marriage after it has caused damage to their credit. In these cases, it’s pertinent to speak with a credit repair and counseling agency. Though it may be possible to settle debts on one’s own, a person will usually end up spending much more on a settlement than they need to. Professional companies can work on consolidating, transferring and reducing a person’s overall debt after a divorce.

Divorce is a disheartening time in anyone’s life, and unfortunately, if unprepared, the accumulation of debt can make these times even more difficult than they otherwise would’ve been. Luckily, there are a few surefire methods to decrease, if not eliminate altogether, many of the consequences of marital debt. Just because a person’s marriage is ending doesn’t mean their life has to, and handling marital debt appropriately will ensure this.

Author Catherine Stephens also works as a small business consultant and contributes this article to raise awareness marriage debt. At www.debtpaypro.com you will find one of the largest providers of customer relationship management software systems within the finance industry. These tools are important in helping a credit counseling agency to properly track and negotiate your debt to make certain there are no unresolved issues after the divorce is final.