Besides the emotional impact of divorce, partners should also take into consideration the financial consequences of it. When it comes to debt, divorce can become complicated and confusing, even when both parties are agreeable and ready to move on. The best way to deal with debt during divorce is to plan and organize in advance so nobody ends up with a black mark in their credit report as a result.
Totals
Before anything can be done about the debt itself, it's important to establish how much exactly is owed. While a clear talk should be enough, you might want to get a credit report to make sure there are no unfair debts charged to your name. Especially if the divorce is not amicable, it pays to ensure your partner hasn't maxed out your credit cards without you knowing it. You can get a free credit report once a year through AnnualCreditReport.com. Mistakes in the report should be addressed with the companies directly to try and have them removed. If there are additional debts you weren't aware of, this should be added to the list to be divided during divorce procedures.
Options
One good way to deal with debt is to pay it off before property is divided among the spouses. Selling a car or an expensive piece of equipment and using the money to pay off outstanding debts can relieve both parties of further negotiations.
Debt Division
For couples who are dealing with divorce proceedings amicably, debt can be divided easily. A person can agree to take on a debt as well as the item (such as a car) the money is going toward. Or he can agree to take on payments toward credit card debt in exchange for keeping the car or another valuable item. This process, known as equalization payment, allows couples to end their negotiations and each person to take over the agreed debt without the need for more interaction. According to DivorceInfo.com, the one other option is to split debts equally and for each party to continue paying their part.
Dangers
According to DivorceInfo.com, deals made with a spouse over the repayment of debt do not hold in front of third parties. This means that if your spouse agrees to repay a particular credit card but she later defaults on it, the company will come looking for you. A signed agreement between spouses (in front of a lawyer) can give you some leeway in front of the court so you can prosecute your spouse for unpaid debts.
Solutions
Aside from the possible agreements that can be made between spouses, there are other ways that debt can be dealt with. One example is debt consolidation, in which everything is put together into a lump sum. This way, partners will only have to make a single monthly payment and the debt consolidation company will then redistribute the money among debtors. An agreement can be made in which spouses pay in alternating months or the monthly amount is split in half.
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