Debt – The Darkest Side of Divorce
Do you think the term amicable divorce is an oxymoron? It’s not. Some couples do manage do part ways amicably. But they’re in the minority. Most divorces end in anger, nasty accusations and even rage. Not to mention, a mountain of credit card debt.
Marry young, repent in leisure
To paraphrase that old saying “marry in haste, repent in leisure”, statistics show that people who marry young are more likely to end up divorced. This is especially true of men. One study reported that 27.6% of men who marry before the age of 20 end up divorcing. Men 20 to 24 years of age are even worse as 36.6% of them divorce. Women who marry at 20 or younger are less likely to end up divorced (11.7%). But the percentage gets higher for women who marry at age 20 to 24 as 38.8% of them end up in divorce
Most couples that are going through a divorce think first about the children (if there are any) and then assets. Who gets custody of the kids? Who will get the house? Who gets which car? Who gets what furniture? Who gets the power tools or the flat panel TV?
Where do you live?
How you will divide your assets varies from state to state. If you live in a common property state such as California, all property acquired during the marriage must be split 50/50 – at least in theory. There are exceptions to this such as gifts and inheritances. But common property law holds that both spouses own whatever else was acquired during the marriage jointly so everything should be divided equally.
For example, if the couple has $100,000 equity in their home, the wife might want to stay in it but will have find $50,000 to buy out her ex-husband’s share
Non-community property states
If you live in a non-community property state, the rules are different. In this case, the court will try to make an equitable division of the couple’s property so that it is divided in a fair and just manner, according to the specific circumstances to the divorce. However, equitable does not necessarily mean equal.
Debts – the elephant in the corner
What most divorcing couples don’t think about until it’s brought to their attention – and which can come as a nasty surprise – is their debts.
Most American couples have a lot of debt. They have home loans, car loans, credit card debt and sometimes personal loans or medical bills. One recent study showed that the average American household is carrying $19,000 in unsecured debts, which obviously doesn’t include mortgages.
Decide what you owe
When it comes to debt, the best answer – if you can do it – is to sit down calmly and go over all your bills and financial statements to get an accurate picture of where you stand. Both of you have equal access to your financial data so that both of you should know how much you owe.
Debts and assets should be divided equally
It’s ultimately the court that will decide how to divide your debts as well as your assets. It will specify which of you will be responsible for paying specific bills. As a general rule, the court will try to divide assets and debts equally. However, the two can be used to balance each other. In other words, the partner who gets more of the property might also get more of the debts.
NOTE: The laws for dividing property and debt vary by state. This means that only a lawyer can advise you of how your assets and debts will most likely be divided.
If your spouse can’t pay
When debt gets really nasty is when the spouse who was assigned some of the debts either can’t or won’t pay. In this case, the creditors may come after you. This will seem incredibly unfair to you but the law holds that it’s fair to your creditors who shouldn’t be left holding the bag because the two of you decided to divorce.
What you can do
If your spouse isn’t paying the debts that he or she has been assigned, you can petition the court to execute your divorce agreement. Your ex-spouse will then have to appear in court to explain why he or she is not following the court’s orders. In some cases, he or she may be fined or even sent to jail.
Credit cards can be a major problem
The problem with credit cards is that the credit card providers aren’t subject to divorce decrees. If your former spouse doesn’t pay up, the credit card companies can consider you to be liable for debt that was jointly incurred.
This means that the best way to leave the marriage is with no jointly held debt. You could agree to either pay the balances owed on the joint cards together or divide up that debt and transfer it to other cards in each partner’s name.
If you have joint debt that your ex-spouse won’t pay or files for bankruptcy, you can end up in a world of hurt. Your creditors can come after you for the entire debt, plus penalties and interest.
NOTE: In community property states, both spouses are responsible for debts even if they were incurred by just one of the partners. The community property states are California, Arizona, Louisiana, Idaho, New Mexico, Nevada, Texas, Wisconsin and Washington.
You do have several alternatives for paying off any debts. The best is that you agree to pay all of them. Second, you can agree to take responsibility for them but you will get more of the assets in compensation. Third, you can agree to let your espouse take responsibly but that your spouse will get more of the assets in compensation. Or you can agree to be equally responsible for them.
Freeze your debt
Once you know how much you owe, your number one goal should be to ensure it doesn’t get any worse. You can freeze your credit card debt by calling the credit card companies (you’ll find their phone numbers of the back of the cards) and cutting off the authority to make new purchases. Of course, this probably will mean that you won’t be able to use it either. And don’t do this without first letting your spouse know what you’re doing. If he or she tries to use the card and is embarrassed to find it’s now worthless, you can bet this will only make matters worse.
If all else fails
If you’re stuck with credit card bills but either can’t or won’t file for bankruptcy, you could hire a debt relief company to help. A company such as National Debt Relief can work with your creditors to reduce your debt – sometimes by as much as 50% – and develop a payment plan that will get you completely out of debt in 24 to 48 months. Even more important, National Debt Relief charges nothing until you sign off on the payment plan. This means you have nothing to lose except maybe 50% of your debt.