When going through divorce, dividing debts is just as important as dividing assets for many Illinois residents. Whether it’s credit cards, lines of credit or personal loans, many people have taken on debt in some form over the course of their marriage.
During the divorce process, all marital debts are divided “equitably” between the spouses, just like marital assets. But even though one spouse might agree or even be ordered by the court to take on certain debt doesn’t mean the other spouse is off the hook.
The truth is that creditors don’t care about what’s written in a divorce decree. That means they will hold both spouses liable for joint debt as long as they can. Consequently, the best way to deal with marital debt is to pay it off before the divorce is finalized using any cash or savings available.
Of course, it’s not always possible for divorcing couples to pay off all of their debt, which is when the following steps come in:
- Find all credit accounts in you or your spouse’s name.
- Determine which accounts are jointly owned.
- Determine which spouse will be responsible for which debts.
- Ask your spouse to transfer his or her assigned debt to a separate account using a balance transfer.
- Freeze joint accounts and close them once they have been paid off.
- Remove spouses as “authorized users” from individual accounts.
Additionally, individuals who are worried about their credit suffering if their exes don’t make timely payments on marital debt can choose to take on the debt themselves. The divorce agreement can be drafted to offset the expense of the debts with a greater percentage of marital assets.
Talk to your divorce lawyer for more tips for handling marital debt during divorce.
Source: Fox Business, “Debt and Divorce: 5 Steps to Make a Clean Credit Split,” Dawn Papandrea, July 14, 2014