How Should We Split Debts When Divorcing?
Residents in Ohio who are contemplating divorce should give as much thought to how they will divide their debts as to how they will divide their assets.
People who live in Ohio and make the difficult decision to end their marriage know they must face a myriad of even more tough choices when working out the details of their settlement. It is common for couples to spend a lot of time and energy thinking about how they will split up their assets and who will get what. However, it is also important that they pay close attention to how their debts will be divided.
Divorce agreements and creditors
Perhaps one of the biggest pitfalls people make is expecting their divorce decree to protect them from future financial entanglements with their former spouse. As explained by Money Management International, even if a divorce decree clearly outlines financial responsibility for a particular debt to one spouse, a creditor may still pursue repayment from the other person so long as the debt remains in both people’s names.
Forbes adds that a house and a its corresponding mortgage provide a great example of how this can play out. A divorce settlement might indicate that one spouse will keep the family home and will be responsible for making all mortgage payments on the property. If that person is ever late on a payment or misses a payment, the lender may attempt to collect the funds from the other spouse. Any missed or late payments may also be reported on both spouses’ credit reports.
While it is possible to pursue legal action against a spouse in these matters, the time and cost involved in doing so may not end up being worth it in the end.
Proactive steps are important
When and where possible, couples should seek ways to pay off any joint debt prior to initiating their divorces. If that is not possible, they could agree on who will pay which debt. Then, each person could transfer the joint debt they are supposed to pay to a new account in their name only. This is the only way to successfully remove the other person from being liable for the debt. In the case of a mortgage, this means the person who wants to keep the house should get a new mortgage in their name only.
NerdWallet adds that couples should collect all financial documentation as soon as they know they will be getting divorced. This will give them a good way of identifying the full scope of their assets and debts from the beginning.
Legal guidance is always advised
Divorcing couples in Ohio should always work with an experienced attorney when ending a marriage. This will give them someone on their side to advise them of the ways they may be able to protect themselves today and in the future.