canstockphoto28074279Divorce is challenging for a number of reasons. The legal part of the divorce can be stressful since it concentrate mainly on how the assets and debts will be split up. Divorce isn’t just emotionally draining. It can also get quite expensive.

 

There are ways you can avoid stress by learning the basics of debt and divorce:

 

1. Get familiar with the laws in your state. Since the rules vary from state to state, find out who will be responsible for paying off the debts. In some states, the name on the debt is the one that’s required for making the payments while both parties are reliable in other places. Regardless of whose name is on the account, you may still be responsible.

Speak with a divorce attorney to learn more about the laws in your state.

 

2. Joint credit cards are equivalent to joint debt. If both of your names are on the credit card, you’re also responsible for paying off the debt. If your spouse charged $10,000 without your knowledge, the credit card company will potentially hold you equally responsible for the debt.

After the separation, all credit card purchases and cash advances are the sole responsibility of the person that made the transactions. The time period of the separation occur depends on the laws in your state.

 

3. Cancel all joint accounts during the divorce proceedings. You don’t want to be held responsible for your soon to be ex spouse taking out a large cash advance or mounting credit card debt. Make sure that you’ll have enough money in your account and check your credit rating before cancelling the credit card account.

 

4. The court ruling may not protect you from creditors. If your name is on the account, the court’s decision doesn’t matter to the creditors. If there’s a credit card, mortgage, car loan or any other debt, you are still liable. This can negatively affect your credit if your ex fail to pay it off.

 

You can also face a lawsuit for the debt. If this describes your situation, you have the option to sue your ex for failing to honor the agreement. This can be very stressful for both parties. If you feel that you’re not responsible for paying the debt, allow the courts make a decision on the matter.

 

5. Pay off outstanding debts. Paying off all of your debts or converting joint accounts to individual accounts will make the divorce process easier and less stressful. If this isn’t possible, keep a close watch on your joint accounts and get a copy of the documentation of your finances.

 

6. Consider the mortgage payments. The banks unlikely will remove either of your names from the mortgage.  The more people that’s responsible for the mortgage payments, the happier it will make the lender. It’s probably best for you to sell the home and split the proceeds. If either one of you decide to keep the home, you have the option to refinance the home to remove the other party from the loan.

This is usually the largest debt that’s created by married couples and is also chaotic during divorce proceedings. The parent with physical custody of the children will typically get possession of the home.

Refinancing is a possible solution if one of you have sufficient income and a good credit rating and there is enough equity in the home.

Selling the property is the best choice to pay off the mortgage in most cases. This will allow both parties to be free of debt and rebuild their life.

 

7. Think twice about signing a quitclaim deed.  It allows one party to give up all claims of the property. Many people make the mistake of thinking they are no longer responsible for making the payments if they sign it. You will lose any equity and use of the property and still be responsible for the mortgage payments.

Divorce can be emotionally and financially draining. The way debts are handled during the divorce process depends on the laws in your state. A good divorce attorney can help you to make sure that your finances are intact and make it easier to transition to the single life without emptying your bank account.

 

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