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Everything you need to know about divorce and debt

Everything you need to know about divorce and debt

When a marriage comes to an end, it is not a simple matter of two people signing the papers and going their separate ways. During the marriage, debts and assets have been accumulated to each party and to the couple collectively. These need to be divided up equitably in order for the divorce to be finalized. The separation agreement will stipulate the manner in which debts and assets are to be divided. Although the separation agreement will ultimately be decided between the two spouses, there are some guidelines to the division of debt. Read on for a basic guide to debt and divorce.

What is debt?

What is considered debt legally speaking and will therefore be included as such in a separation agreement? Debt is any obligation that requires one or both of the parties to pay another party. Debts can be jointly or individually acquired and are required to be paid over a certain period of time. Examples of debts include mortgages, personal loans, car loans, credit card debt, home equity line of credit debt, unpaid property taxes, unpaid utility bills.

How debt is divided in divorce

All debts that are not business or commercial debts will be included in a separation agreement. Most of the debts included under the description above are considered family debts, i.e. they are considered to be the joint responsibility of both spouses, even if some of them were accumulated individually. If the divorce goes to court, the two spouses will not have a say in how the debts are divided. Instead, the judge will divide them up in the most equitable way possible. The judge will consider the ways in which the debt was accumulated, the size of the family debt compared to that of the family assets, and the respective ability of each spouse to pay, or whether one spouse’s actions caused a decrease or increase in the amount of family debt. Your separation agreement lays out how your assets and debts will be split. The default approach is to aim for a 50/50 split.

What happens when you file for bankruptcy?

Many couples choose to file for bankruptcy because they struggle to manage existing debts and expensive living arrangements. You can file for bankruptcy either before or after the divorce, although each of these situations will play out somewhat differently. You and your spouse filing for joint bankruptcy is a very effective way to deal with joint debts. It is best to consult with an attorney or an insolvency trustee to work out if this is the best option, and how to do it in your particular situation.

Divorce is a difficult experience, but the process of getting divorced does not have to be. As these dispelled myths make clear, the process can be smooth, civilized and guided by the law, rather than driven by emotion.SplitEasy helps to make the process even easier by providing the completed divorce documents you will need, whether you are doing it yourself, or taking the case to court. Contact us for more information.