People who are going through a divorce have to consider a variety of factors as they work through the property division process. Many may automatically think about the assets they have to divide, but that’s only part of what happens.
Debts that were acquired during the marriage don’t automatically go away because of a divorce. Instead, a plan for the debts has to be figured out as part of the property division process.
What options do you have for debts?
Your circumstances determine what options you have for debts. It may be possible to liquidate assets to pay for the debts before the divorce is finalized. If that’s not possible, each debt will have to be assigned to a person.
When debts aren’t paid off, and they’re assigned to one person, creditors can still hold both spouses liable for the balances. This means that one party’s failure to pay the debt can result in a negative mark on the other party’s credit score. The only way to prevent this is to ensure that both parties have the debts transferred into their own name, but that might be difficult.
Creditors aren’t bound by divorce orders, so they don’t have to remove either party’s name from an account. They can still require that the party responsible for the debt have a suitable credit score and meet other standard criteria to have the debt listed as an individual account.
Debts are sometimes used to balance out the assets during the property division process. It’s critical to understand how each option you have will impact you now and into the future. This includes considering how they will affect your credit score. Working with someone familiar with these matters may be beneficial as you go through this process.
