How Does Divorce Affect Your Debts?

Divorce is challenging for a variety of reasons. The legal aspect of divorce is primarily concentrated on the division of assets and debts. Divorce isn’t just emotionally costly. It can be financially expensive, too. It is important to have a financial expert by your side as you start to navigate this piece. A Certified Divorce Financial Analyst ® can assist in all of the following at a much lower hourly fee than an attorney. Once financially organized, the attorney can then step in and handle the legal issues with less time and money for you!

Here are a few basics regarding debts in a divorce situation:

1. The rules vary from state to state. 

In some states, the name on the debt is the one responsible. In others, the debts are held jointly, regardless of whose name is on the account. Consult a divorce attorney or CDFA ® to learn the laws in your state.



2. Joint cards equal joint debt. 

If both names are on the card, both parties are usually equally responsible. It doesn’t matter if you never used the card and your spouse charged $10,000. Its important to pull a credit report in the beginning to know which debts are joint and the balance at separation.

After the time of separation, any additional credit card purchases or cash advances are the sole responsibility of the person that initiated them. The time at which separation is considered to have occurred depends on your state of residence. It is important this date is documented legally so there is no confusion or misuse of the cards after separation date.

3. Cancel any joint credit cards during the divorce process. 

The last thing you want to deal with is your soon-to-be ex charging up the card or taking out a large cash advance. Before canceling any card, be certain you have enough money or other credit to live on. If your soon-to-be-ex is an authorized user, be sure you have them removed and make sure you are removed as an authorized user on any of their cards.



4. The courts don’t affect creditors. 

If your name is on an account, it doesn’t matter to your creditors what the court ordered. If your name is on a credit card, car loan, mortgage, or any other debt, you are still liable. This means your ex’s failure to make the loan payment can negatively affect your credit.

You can also still be sued for the debt. If your ex is responsible for the debt, you can then sue your ex for not honoring the agreement. It can be a big mess, but going back to court is always an option but it is an expensive one!



5. Pay off debts or convert joint accounts to individual accounts when possible. 

This will make the divorce process cleaner and easier. If you can’t do this, monitor your joint accounts and keep careful records.



6. The bank is unlikely to remove either name from the mortgage. 

It will be necessary to either sell the home or refinance the home to remove either party from the loan. It is important to work with a lender who is an expert in divorce as it relates to mortgage and real estate. A Certified Divorce Lending Professional can assist you in this challenging decision and process.

This is commonly the largest debt a married couple will have and often creates the most drama during a divorce. The parent with physical custody of the children will often take possession of the home.

If one of you has sufficient income and credit, and there is enough equity in the home, refinancing is a possible solution. One party can refinance the other off of the loan and title and also pay them any equity due with an owelty lien.

In most cases, selling the property is the easiest way to relieve mortgage debt. Both parties are then free of debt and responsible for their own financial future.



7. Beware of signing a quitclaim deed. 

This deed does exactly what it says. It allows one party to give up all claims to a piece of real estate. It does not absolve one from the responsibility of ensuring the mortgage gets paid. You’ll lose any equity in the property and any use of the property. But you still have all the responsibility for the mortgage.

Divorce is hard in many ways, including financially. It is a good idea to meet with a Certified Divorce Financial Analyst or CDFA ® before you meet with your attorney. The CDFA ® can assist you in all of the above steps at a fraction of the cost of the attorney. Once financially organized, a good divorce attorney can help to ensure that you emerge from the divorce in the best possible financial situation.

My name is Angela Deaton and I am a Certified Divorce Financial Analyst ® and a Certified Divorce Lending Professional. I am also a single divorced mom of 3 myself. Please reach out for a free consultation at www.d4financial.com