After years of marriage, it is likely that a couple will have amassed countless assets. From a home and cars to retirement funds and savings accounts, a divorcing couple must carefully evaluate all assets when determining an equitable split. Unfortunately, dividing property is only one portion of the puzzle.
Determining who is responsible for the repayment of certain debts can often derail a pleasant negotiation. Debts can be challenging because both parties have generally enjoyed the benefits of the asset – whether it is due to credit card use, a personal loan or a medical procedure. As a first step, the divorcing couple must thoroughly examine their finances to identify the debts that need to be examined. Generally, there are four main categories:
- Credit card debt: This is a type of debt that all couples will be forced to examine. Whether it is a joint account (a card with both spouse’s names) or it is simply a card used during the marriage, responsibility for the debt will likely be shared. The best advice, when possible, is for the couple to pay off the debt prior to the divorce.
- Home mortgage: Many couples will have invested in purchasing property during the marriage. When it’s time to divorce, however, certain decisions must be made. In general, the couple has two options when looking at the matrimonial home: sell it and split the profits or one party buys the other party’s share of the debt.
- Vehicle loans: Loans for cars, trucks, motorcycles or boats can become complicated because they are not easy to divide, and the loan paperwork generally contains both signatures. This might be a time when the divorcing couple gets to use the power of negotiation to determine an equitable split. For example, one party keeps the car and remaining debt while the other party accepts an equivalent amount of credit card debt.
- Medical bills: Most often, the medical debt will need to be divided. Even though a procedure might only be for one of the parties, both parties will share the responsibility of paying it off.
While these are general guidelines, it is wise to remember that every divorce is unique. It is crucial that you discuss these matters with a skilled legal professional. A divorcing couple’s future finances are tied to asset division, debt division and support. By using all three facets during negotiations, both parties can reach a fair compromise.
