Divorce Financial Protection
Divorce is often a tough phase for separating couples. Divorce financial protection is needed. From starting a divorce to the end of the procedures, it’s a rollercoaster ride for them. And it can be more complicated when assets and debts are in question. As a matter of fact, when couples divorce, their property, and assets must be divided too.
Dividing assets and debts accumulated over the course of the marriage and deciding who should receive them is a complicated process. Pressing issues may arise that include anything from who gets to keep the marital or personal assets to who has to pay off credit card debt or shared auto loans.
Dividing these assets and debts depends on your state laws and divorce circumstances. So understanding how assets and debts are divided in a divorce can help you be prepared and safeguard your assets by making informed decisions and giving you divorce financial protection.
How is property divided in a divorce?
Dividing your hard-earned property and assets in a divorce is usually challenging but necessary, and couples should be cautious to avoid making mistakes.
In most states, a general idea when dividing property and debt in a divorce is that you may get to keep your separate property and divide marital or community property.
Marital and separate property
Community or marital property includes any asset gained during the marriage. Likewise, separate property means any asset purchased before marriage or bought with an inheritance or gift.
These properties may be divided depending on the law governing the state where you reside. In most states, marital property will be divided between spouses, but you and your spouse will retain your separate properties.
For example, you purchased a car after marriage. It will be considered marital property regardless of whether you buy it with your own money.
Alternatively, suppose you purchased a car before marriage, sold it, and purchased another car while married without any additional funds. That car will be considered your separate property.
Credit card debts
According to most state laws, you must pay off credit card debts only in your name in a divorce.
In the case of joint credit cards, you and your spouse are responsible for paying the debts. This applies regardless of who used the credit cards or made the most payments.
If you have cosigned for your spouse, you will be held accountable for the debts incurred in the cosigned credit card. For example, a credit card company may contact you if your ex misses or skips payments. This is also applicable in the case of joint credit cards.
In most cases, a mortgage debt taken to buy a house after marriage belongs to both spouses. You and your spouse are both accountable for it.
When the mortgage is in one spouse’s name, the court will look into the financial conditions of the couple to determine how the debt will be divided or split.
Auto Loan Debt
In the case of auto loans, even when the money used to purchase the vehicle was earned by one of the spouses or only one spouse used the vehicle most, both spouses are responsible for the debt if it was purchased after marriage.
Alternatively, for auto loans in both spouses’ names, any person can keep the car and pay the loan.
Medical debt in most states is treated as marital or community debt. It means both spouses are responsible for it. The case remains regardless of the voluntary medical treatment or the other spouse’s approval.
However, the court’s decision may be based on the specifics of the divorce case. The judge will determine whether the couple lived together when the debt was incurred. Also, the court may look into factors like whether the debt was incurred during an emergency or other required medical procedures, or it was incurred after voluntary surgery or other unneeded procedures.
How to divide property mutually
Divorce costs shoot up when a trial takes place. According to a Nolo survey, the average cost of a divorce that goes on trial for even one issue is about $20,400, and $23,300 for a trial on two or more issues.
But when both parties mutually agree on conditions of splitting assets and debts, the trial costs may be omitted.
Here’s how property and debt can be divided mutually between couples during divorce:
List your possessions
Make a list of all valuable or significant assets and debt.
Get the estimated value of each possession
Try to get an estimated value of each significant possession.
Decide on who gets what
Once you have the values of all your assets and debts, try to reach a fair and mutual agreement on who is accountable for which assets and debts this is essential for divorce financial protection.
Get a legal order from the judge
Lastly, obtain the judge’s approval after you and your spouse mutually agree on dividing the assets and debts.
Even when you and your spouse have peacefully agreed on the terms of dividing your assets and debts, a judge must issue a legal order approving the terms. Without court approval, you and your spouse may be entitled to any property or debt during a marriage.
You are not required to appear in court to issue the legal order. An agreement you and your spouse draft may suffice for official approval from a judge.
Seek professional advice
If you think getting a divorce makes your debt situation more problematic, you should talk to a family law specialist. These experts are knowledgeable and have probably seen numerous circumstances just like yours. Additionally, they are knowledgeable about the specifics of handling debt splitting as well as the rules in your jurisdiction.
Divorces are often a stressful situation, not only emotionally but financially too. When finances are involved in a divorce, dividing assets and debts is an important concern and you must incorporate divorce financial protection.
People usually consider their assets first when filing for divorce. Debts are equally crucial since they play a significant role in a couple’s net worth.
Each property and debt may be handled differently in a divorce. Thus, understanding how to divide assets and debts in a divorce is essential. Also, it can be helpful to consult a lawyer if your divorce case is tricky or difficult.
Author Bio: Attorney Loretta Kilday has more than 36 years of litigation and transactional experience, specializing in business, collection, and family law. She frequently writes on various financial and legal matters. She is a graduate of DePaul University with a Juris Doctor degree and a spokesperson for Debt Consolidation Care (DebtCC) online debt relief forum. Please connect with her on LinkedIn for further information.