During the course of divorce, a lot of the focus is on property division and child custody. These are certainly important matters, but there’s a lot more to consider in marriage dissolution than who will get what property and who will obtain physical custody of the children.
To start, it’s important to recognize that divorce is a major financial transaction. While you’ll certainly have to negotiate or litigate a resolution that leaves you with the financial resources that you’ll need for post-divorce stability, you can’t overlook the impact that marital debt can have on your financial wellbeing moving forward.
How debt is handled during a divorce
In Pennsylvania, marital debt is handled the same way as martial property. This means that it is divided in an equitable, but not necessarily equal, fashion. That might sound simple enough, but martial debt can be quite complex and challenging to deal with in a way that protects your interests. Let’s look at some examples.
Credit card debt
A lot of times credit card debt will be divided evenly or the debt will travel with the individual who incurred the debt. However, issues can arise when the card is in your spouse’s name and your name. Here, you could be left on the hook for unpaid credit card debt, even if you no longer possess the card and your spouse or former spouse runs up the debt. It’s best to cancel all jointly held credit cards to ensure that you know which debt you owe and which debt your spouse owes.
A similar analysis can be undertaken for a mortgage. The chances are pretty good that your name and your spouse’s name are on the mortgage, which means that you’re responsible for that debt even if your spouse is unable to pay. The best way to deal with this debt is to simply sell the home and free yourself of that mortgage.
An auto loan
Auto loans are a little trickier. While you’re still on the hook for any outstanding balance if your name is on the loan, it’s a little harder to just sell the asset to free yourself of debt and split any equity with your spouse. Here, it might be best to see if the vehicle can be refinanced only in the name of the party who will own the vehicle post-divorce.
What about bankruptcy?
A lot of people think that a former spouse’s bankruptcy will free of them of any jointly held debts. This isn’t the case. If your former spouse successfully files for bankruptcy, then he or she will be free of that debt, but your name will still be on it. This means that the creditors will come to you to recoup what they owe. Again, this stresses the importance of ensuring that you effectively negotiate or litigate your divorce and do your best to free yourself of jointly held debt. It may also highlight the importance of considering joint bankruptcy prior to divorce.
Do you need a legal advocate on your side?
We know that divorce can be an emotionally and financially challenging endeavor. That’s why we diligently work with our clients to make sure that we can do the heavy lifting for them. We build the compelling legal arguments that they need to protect their interests, and effectively utilize them at the negotiation table and in the courtroom to increase our clients’ chances of obtaining the favorable outcome that they deserve. If you’d like to learn more about our firm and what we have to offer, please continue to browse our website.