Divorce can be one of the most stressful times in a person’s life. Unfortunately, the stress does not always end once the divorce has been finalized. There are still many factors that you need to figure out, such as building a civil relationship with each other, co-parenting, and recovering from the emotional turmoil that caused the divorce in the first place.
Moving on from a divorce can be even more complicated when you have joint debts and loans that you share with your ex-spouse. Now that you are separating, we will discuss your options regarding what to do with the loans and debts you have made together. There are many different types of loans, including credit card debt, student loans, and business debt.
Preparing for Divorce
If you plan to get divorced in Texas, it is wise to assess your financial situation. Make a list of your assets and debts before you file for divorce. Doing so will help you understand your financial situation better to ensure that the process goes as smoothly as possible. If you have a prenuptial or other financial agreement with your spouse, you should get copies of that agreement.
Prenuptial agreements typically address how that should be handled in a divorce and will be a guide through the debt division process. You should also factor your legal expenses into planning and consider a flat-fee divorce service, such as those offered at Divorce Concierge. Other steps you can take to prepare for dealing with joint debts and loans include:
- Requesting a full financial assessment that identifies all outstanding debt
- Have a conversation about who will be responsible for each debt
- Request a copy of your credit report
- Refinance property and other financial obligations in the name of the spouse who will be taking on the debt
- Sell your home and other shared residents when neither of you wants it or can keep it to pay off debt
The mortgage on a couple’s house is often their most significant type of debt. For many couples, the cleanest way to get around the mortgage debt is to sell the home and use the profit to pay off the remaining balance. The couple can split whatever money is left. However, one or both spouses may not want to sell their home. Perhaps they have young children and they do not want to disrupt their children’s lives by moving out of the family home. Dealing with a divorce and a move to a new home can be difficult for kids. There is often an emotional attachment to the property. If one spouse wants to keep the marital property, there are two option:
- Buy out your partner: One spouse can request that the mortgage company remove your spouse’s name from the title after you buy them out
- Refinance: You may be able to qualify for a refinance of your existing mortgage loan and apply for a mortgage under your name alone
Credit Card Debt
On average, Americans carry an average of over $6,270 in credit card debt. Americans owe $807 billion across nearly 506 million credit card accounts. If you have credit card debt that will need to be divided, you are not alone. There are two types of credit card debt. One type is registered under someone’s personal name and the other type is considered as a joint account by the credit card company.
You may be worried about your spouse’s personal credit card debt, but you shouldn’t be. You won’t be held responsible for their personal debt, especially after the divorce. However, if you and your spouse have a joint credit card, it is wise for you to settle the debt before finalizing the divorce process.
You will be able to spare yourself from paying accumulating interest rates and fees. If neither of you can pass a credit card in full before finalizing your divorce, you may want to discuss your options with an attorney or financial advisor. You can consider personal loans for fair credit options, but you should apply separately. Use the money to pay off the credit card debt.
Practical Tips for Managing Debt Post-Divorce
After your divorce has been finalized, it is important to take stock of your financial situation. You will probably already have a new bank account solely in your name. If you are changing your name after a divorce, make sure you open up a bank account using your current legal name. You also need to ensure that you have a plan for how to pay all of your bills on time.
Dealing with your new financial normal can be complicated and stressful, and working with an accountant or financial advisor can be helpful. Here are some practical tips for managing your debt after your divorce:
- Set up automatic payments or calendar notifications to make sure you pay your bills on time
- Develop a debt repayment strategy that works for you, such as the snowball method or the avalanche method
- Use a budgeting app on your cell phone that helps you stay within your budget so you can continue making payments on your debt
- Sell vehicles are property that is still in both of your names as a way to clear the debt
- Remove your name from any outstanding debt which your spouse is legally responsible for paying
- You may want to consider paying off balances as a way to buy your spouse out
At Divorce Concierge, We Offer Flat-Rate Fee Structures for Uncontested Divorce
If you and your spouse have a significant amount of debt, getting divorced can cause even more financial hardship. Working with a law firm that offers flat-rate fees for divorce can help you keep your debt low so you can start your new normal on the best foot possible. If you are considering an uncontested divorce in Texas, contact Divorce Concierge today to schedule your free case evaluation and learn more about our legal services.