If you and your spouse have agreed on seeking a mutual consent, no-fault divorce, you are setting yourselves up for success and we congratulate you both. When it comes to divorce, ending things amicably is best for all involved. As a bonus, it saves a lot of money!
Let’s say you are ready to file your no-fault divorce. You and your spouse may or may not be getting along; however, you have both agreed to work together so you can achieve a swift, mutual consent divorce. Now you’re wondering, “What are we going to do about our debt?”
Debt division is handled on a case-by-case basis. Generally what couples do is sit down, put their heads together and decide the best way to divide their debts. Ideally, the couple pays off all debt before the divorce is final and they ensure they are no longer on any joint accounts.
Meaning, they cancel joint credit cards, or remove one spouse’s name from any such accounts, and they refinance any auto loans or mortgages in one spouse’s name alone. The idea is to sever the couple’s financial ties so they can go their separate ways.
However, not all couples can afford to pay off all their debts. Sometimes, he will keep his car and he will assume responsibility for his auto loan, and she will do the same with her vehicle. Meanwhile, the couple will take the same approach with their credit cards: he’ll pay off his cards and she’ll pay off hers.
If a couple cannot afford to pay off their debt, they may consider bankruptcy. This is usually an option when the couple is struggling financially. For those who do not wish to file bankruptcy, or who do not qualify, they have to be careful about dividing their marital debts, and not allowing them to haunt them later on.
For example, if “John” decides to let his wife, “Mary” keep the house and Mary fails to pay the mortgage, John will be on the hook for the home loan if Mary never refinances in her name alone. It’s the same with credit card debt.
If John agreed to pay off the couple’s $20,000 credit card debt, and he decides not to pay it, the creditor can go after Mary for the money. The creditor is not concerned about what the divorce decree says. All the creditor cares about is the fact that it was a “marital debt” and it can go after John or Mary to collect the money owed, even long after the divorce.
Dividing Marital Debt in Divorce
At Cairns Law Offices, we can help you draw up a marital settlement agreement that divides your marital debts, as well as your marital assets. We can also answer any questions you may have about marital debt and its potential effects on your credit.
We care about you and your financial health, and we’ll do everything possible to help you make the right financial decisions during the settlement process. Call now to speak with a Pennsylvania no-fault divorce attorney for free!