Going through a divorce can be incredibly draining. It can affect you emotionally, psychologically, and financially. While the emotional and psychological healing can take a long time, one of the best ways to give yourself a fresh start following your divorce is to eliminate your financial debt as soon as possible. However, many couples undergoing divorce are unsure of how to deal with debt post-divorce.
If you are leaving your divorce in debt, then it’s important for you to know how to deal with debt post-divorce, and that’s what we look at in this post. Find out how you can deal with debt post-divorce.
Leaving Your Marriage in Debt
Almost all people in the United States carry some sort of debt. Whether it’s student loan or credit card debt, or even mortgage, living life around debt is considered a normal phenomenon. And since marriage is an institution between two individuals, debt for married couples shouldn’t come as a surprise. But if you are ending your relationship with your partner, you and your spouse will have to deal with shared debt as part of your divorce process.
Some of the most common types of debt among couples that need to be divided when divorcing include
- Personal loans
- Credit card loans
- Student loans
- Medical debt
If you and your partner share debt at the time of your divorce. Then the court will distribute the debt amount equally between you two during the divorce process. But, how you share the debt amount depends upon your divorce settlement. Which, likely means that you will have to pay debt obligations following your divorce.
On the other hand, if you have individual debt (such as a student loan or personal loan). That you brought into the marriage. Then that loan will remain your responsibility. And the court will not treat it as a shared debt. So, they will not distribute this debt post-divorce.
Why Dealing With Shared Debt Post-Divorce Can Be a Challenge
Dealing with shared debt following a divorce can be a challenge primarily because your everyday expenses will change. After all, you will be moving out of a combined household where you and your spouse were previously contributing for expenses to an independent household where you will be solely responsible for your expenses. In most cases, couples have to go from a household with two or more incomes to a single-income household.
The transformation from a combined household to an independent one can be challenging because an individual will now have to deal with increased expenses while taking care of any individual debt. Moreover, they will have to deal with the repayment of shared debt.
Dealing With Your Financial Situation Before Divorce
If you and your partner are planning to file for a divorce, it is important that you assess your individual and couple’s financial situation, including assessing your debt, before you file for divorce. While it may not always be possible for all couples, it is one of the practical solutions that can help you and your spouse adjust their expenses accordingly while preparing for the divorce, as it ensures that your divorce and post-divorce debt dealing goes smoothly.
Some of the things that couples can do as part of their preparation for divorce include the following.
- Complete assessment of the financial situation, including assessment of all outstanding individual and shared debts.
- Request a copy of your credit report, which can help you analyze your credit score for future lending.
- Refinance financial obligations in the name of the person who will be eventually taking care of the debt following divorce.
- Sell your property that neither of the partners will want or will be able to keep.
It is also important to get a copy of any marital agreements you have as they also feature how debt will be handled in case of a divorce.
How to Deal With Mutual Debt During Your Divorce?
As mentioned early, when a couple is undergoing a divorce, it is moving from a shared income household to a single income household. Therefore, it is common to have questions like who will pay the bills or mortgage payments? Typically, the person who was responsible for paying the bills during the marriage should continue to pay for the expenses until the divorce is final. Moreover, they will also continue to use the same accounts to pay off the bills.
Managing Finances Following Divorce
Once your divorce is finalized, it’s important to take a look at your financial situation. Following your divorce, you will likely have new and different bank accounts in your name. Moreover, you will need to have a plan to ensure that you pay all your upcoming bills and debts on time. While it can be challenging to meet all the expenses, you can work closely with a lawyer and a financial advisor who will help you get through the process smoothly.
Some of the other ways you can manage your debt following divorce include:
- Setting up a calendar or an automatic payment schedule that ensures that all your bills are paid on time.
- Develop a debt repayment strategy that is practical for you, such as the avalanche method or the snowball method.
- Dispose of the property or other assets that are in both of your names.
- Make sure you remove your name from any outstanding debt that may be in your name, but your partner is responsible for paying.
If you are dealing with debt post-divorce, it is important that you remain on top of your repayments, so you don’t miss out on any payments. Failure to timely repay your debt can result in you returning to court, which will cost you a lot more money and inconvenience. Remember ignoring debt post-divorce while hoping the problem will resolve on its own will only lead to more trouble. Therefore, you should get in touch with your divorce attorney and better understand how to manage the situation.
A family law attorney will closely work with clients who are dealing with challenging debt situations during, before, or after their divorce. If you are going through a divorce and need help choosing the right divorce attorney, click here.