Mediated divorces can allow couples to divide debt and assets in a fair way that the couple decides. It may go without saying that dividing debt can be even more contentious than assets. Here are some thoughts about handling debt in your divorce.
Get It on the Table
When you sit down to mediate your divorce, address debt before anything else. Lay out all the different kinds of debt you have, from mortgages and car payments to credit cards. You may find that by discussing the hard stuff early, you can come to an agreement about how you want to approach the rest of the process.
It may be a good idea to acknowledge the debts you will have to divide before you even begin legal proceedings towards your divorce. At least make sure you are on the same page as to what debts you share, even if you don’t yet decide what to do about them.
Get Your Credit Reports
Get copies of your individual credit reports from the major credit agencies. You are entitled to a free report every year. This is a good time not only to take stock of what liabilities you share, but where you stand as an individual.
Types of Debt
You may encounter many different kinds of debt as you go through the process. Some of the most common forms of liability that come up in mediated divorces include:
- Mortgages on homes or vacation properties. This is often the largest issue to solve and couples must decide whether to sell the house to pay off other debts, hang on to the property, have one spouse buy out the partner or look at other alternative solutions.
- Student loans are a very common debt, especially as education costs rise. Generally speaking, whoever took out the loans remains responsible for paying them off.
- Revolving or loan debt from credit cards or personal loans can be a problem, especially if the cards or loans are jointly owned. The couple usually splits these debts down the middle but there can be disagreements over who owns what part of the debt that must be resolved during mediation. This kind of debt can involve retirement loans and home equity loans as well as credit card and personal loan debt.
- Car leases or loans can also be contentious, especially if both couples use the car. In general, one partner will buy out the other with that partner getting to continue using the car, though other arrangements can sometimes be made.
Before you begin to fight it out and let the courts decide for you who takes what, consider a mediated divorce settlement. This will allow you both to sit down and talk, preserving your partnership and respect for one another while fairly deciding on how debt will be divided and discharged.
If you are going through a divorce and need help dividing debt, we can lend a hand. Call Jones Divorce Mediation today for a consultation or to begin the process.
Disclaimer: The content provided in the blog posts of Jones Divorce & Family Law is general information and should not be considered legal advice. Please contact a lawyer for legal advice tailored to your specific situation. All articles are current as of their original publication date.