Divorce is a major financial upheaval. While dividing up assets is often the focal point of divorce proceedings, equal attention must be given to debts. Failure to address debts can have long-lasting ramifications for both parties.
Debt acquired during a marriage is generally considered marital debt, so both parties are responsible. Even if a court assigns responsibility for paying off a specific debt to one spouse, the other isn’t entirely off the hook until the debt is paid in full. The only way to avoid this is to pay off the debts as part of the property division process.
Risk of assigning debts in divorce
One significant risk in carrying debt post-divorce is that your ex may not pay as ordered. The creditor could come after both parties if the person responsible for paying off the debt defaults because the civil property division order doesn’t bind creditors. This could lead to a situation where your credit score is hit because of your ex’s financial irresponsibility.
Selling assets to pay off debts
It might seem counterintuitive to sell off assets like property, cars or investments to pay off debts, but it’s a move that could save you a lot of financial hardship in the long run. Liquidating assets can give you the means to pay off debts more quickly and move on to your new life unencumbered.
Consider refinancing options
Another way to separate financial ties is through refinancing. For instance, if you have a joint mortgage, one party could refinance the loan in their name, removing the other from the obligation. This is often easier said than done, especially if you’ve already taken a credit hit.
Although divorce is challenging, it’s essential to consider your financial well-being. Paying off debts during divorce can ensure you step into your new life on solid financial footing, free from the financial entanglements that could hold you back.