The importance of looking after your assets during divorce
Once a person arrives at the understandably difficult decision to pursue a divorce, they often want the matter to proceed as smoothly and as quickly as possible so that they can start of a new chapter of their life. While this is understandable, it’s important that they don’t lose sight of rather important issues during the course of settlement negotiations.
For instance, experts indicate that there are certain mistakes that people often make concerning their assets during settlement negotiations that can have unforeseen and significant consequences further down the road.
In today’s post, the first in a series, we’ll explore one of these crucial mistakes and what divorcing spouses can do to avoid making it.
Jointly held debt
According to experts, it’s extremely important for people to understand that while a final divorce decree might state that one spouse will assume responsibility for paying off a jointly held debt post-divorce, this doesn’t necessarily provide the legal protection they think it does.
That’s because a creditor is not bound by a divorce decree, but rather by the terms of the contract originally signed/accepted by both married spouses. This essentially means that if the spouse who agreed to pay off the outstanding debt fails to do so, the creditor can then come after the other spouse for the money owed.
In light of this reality, experts urge people to consider taking the following steps during divorce negotiations:
- If the other party agrees to assume the mortgage debt, make sure that it is refinanced in their name only (if possible).
- Make sure all outstanding debts that one spouse has agreed to pay off are indeed eliminated or transferred prior to the finalization of the divorce.
- Cancel all jointly held credit cards and secure a copy of a credit report to ensure all debts are accounted for during the negotiations.
In our next post, our blog will discuss how a divorcing spouse needs to pay careful attention to potential tax consequences when it comes to dividing certain high-value assets.
If you would like to learn more about the divorce process, or have questions on divorce-related issues like child custody or property division, consider speaking with an experienced legal professional as soon as possible.
Source: Marketwatch, “Divorce? The 6 worst money mistakes,” Leslie Thompson, Sept. 23, 2014