Dividing Debt In a Divorce
Division of assets and division of debt always come into consideration during a divorce. Typically, the divorcing couple and their lawyers try to come to an agreement regarding the division of these things. If they cannot, a judge will make this decision for the couple. The division of debt is important because it can have long-lasting effects on your credit report.
In the state of Florida, the court considers three kinds of debt during a divorce.
Premarital debt is just that. It is debt that a spouse incurred prior to entering into a marriage. This includes debts incurred on a credit card in one spouse’s name. If the other spouse never used these credit cards, then a Florida court considers these debts to be the responsibility of the spouse in whose name the credit cards were issued.
There are some debts that a Florida court considers to be non-marital and beyond the court’s power to divide. Non-martial debts may include debts incurred in one spouse’s name and those paid with non-marital assets. For instance, if one spouse takes out a personal credit card and none of the purchases on that card contributed to the marriage, that would be considered a non-marital debt.
Any debt account that was opened in both spouse’s names or that were used for purchases that contributed to the marriage are considered joint debts. Joint debts are typically divided evenly between the spouses if the spouses cannot reach their own agreement, though a judge may take into consideration such factors as the length of the marriage and each spouse’s contributions to the marriage. Other things that may be considered joint debts are mortgages, car loans or leases, and credit cards issued in both spouse’s names.
The important thing to remember about divorce debt is that it doesn’t change the terms of the agreement with the creditor. The debt will still have both names attached to it unless you talk with the creditor to get the information changed. This is a good idea after a divorce is finalized. Otherwise, your ex could damage your credit rating by not paying the debt or running it up higher.
Most financial institutions are willing to change debt agreements if you can show proof of divorce. You can close out joint accounts and have them open new ones. There are also special refinancing loans for people who have undergone a divorce to place the debt back under one name.
During the first few years of your divorce, it’s a good idea to use a credit reporting tool to track changes to your credit. This will help you catch any problems that might come up. This is important in cases where an ex may no longer have use of an item, like a car, but still has to make payments on it. It’s good to have protection.
Although a divorce may be difficult, the division of debts need not be a complicated process. Make sure that you pay the portion you are responsible for and remove yourself from the debt you are not responsible for and you will come through a divorce with your credit intact. For more information, contact Gustavo E. Frances.