How to Divide Debt During a Divorce

Dividing debts can be a tricky affair. Therefore, you will need to be extremely cautious about the entire debt division process. What Kind of Debt Needs to be Shared Between the Partners? Most people find divorce debt very complicated to handle. In most the households, payment of debts constitutes a major or a minor part of the monthly household expense.

These fixed expenses can take a toll on your life if they are not divided properly at the time of the financial settlement. Most people think that if the court orders one of spouse to pay for a joint debt, he or she will be relieved of the responsibilities. This is a common misconception that comes back to haunt the people once they are facing troubled times due to a joint debt. While the court asks one of the partners to pay a joint debt, it cannot prevent a creditor, which in most cases is a bank, to pursue either party for payment of debt dues. Unless you and your partner change the joint debt contract, your liability will remain.

Therefore, it is not without reason that people tend to think that the best way to handle your divorce debt is to not keep any joint debt. While some people may be able to do so, there are others who may have incurred debts jointly along with their partners. Any debt incurred jointly has to be divided at the time of the divorce.

One of the debts that's incurred jointly is the mortgage debt. If you have taken a joint mortgage loan, make sure that you know how the loan amount will be settled. There are times people tend to take joint credit cards. In addition, you may have taken a joint car loan or other loans. It is important that you make a list of all the joint loans to analyse your joint liabilities. How do you go About Dividing Joint Debt? The best way to divide your debt after or during a divorce is to pay off the debt before the divorce.

This is the most foolproof solution to avoid any debt collection hassles in the future. In addition, by doing so you also ensure that your future finances are protected and will not be influenced now or in future due to the divorce. If you do not have liquid assets (cash) to pay off the debt, you can consider selling off some of the joint assets so that you can utilise the cash from these joint assets to pay off the joint debt.

Your next best bet would be to sell the joint asset that has come as a result of a joint loan. This can be especially beneficial in the case of real estate. Therefore, if you have taken a joint loan to buy a house, it would be a good idea to sell the house and divide the profits or the losses resulting from sale.

It is important to remember that even if you remove your name from the ownership of an asset, you do not remove your liability associated with it. If either of you want to keep the house or other joint assets, you should opt for refinancing of the assets. The mortgage company will have to be informed about your intentions of refinancing and the company will follow the requisite procedures for doing the same.

Tips to Tackle Joint Debt

  • If you have joint credit cards, cancel all these cards to ensure that your spouse does not overspend, leaving you to pay off the debt.
  • It would be a good idea to start separating your finances immediately.
  • If you have joint bank accounts, make sure that you cancel all of these and withdraw any authorisation provided to your spouse to sign on your behalf
  • Consult a mediator if you and your partner are not able to reach debt settlement decisions.
Handling Debt Assigned to you Handling debt single-handedly can be quite a challenge. Therefore, you must be sure about how to handle the debt.
  • Your first step should be to take debt counselling.

    Debt counselling will help you understand the nature of your financial obligations and how to plan your finances in order to meet these obligations.

  • You will also need to save more money to pay off the debts. Therefore, keep a close watch and how you spend and where you spend the most. Make a list of daily expenses if you have to and see what can be cut down from this list.

  • You can also try negotiating a new, lower interest rate with the lender.

James Walsh is a freelance writer and copy editor. If you would like more information on how to get a quickie Divorce see

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