Your marriage is over, and it’s time to divide your marital assets. Who gets the house? The silverware or stocks you’ve both accumulated together? Do you have any outstanding debt between you both?
Who will get the debt?
A divorce is a highly stressful, emotional and difficult change in one’s life. Equally difficult, are the decisions a separating couple need to make in order to move forward in their lives. Dividing a couple’s assets is usually at the top of the list. Dividing a couple’s debt is usually at the bottom of the list, and it gets hashed out during the final settlement stages.
Unsettled debt is best dealt with promptly and cleanly, to avoid the divorce process being dragged out. The more amicable you negotiate with your soon to be ex-spouse, the less damage your path to financial freedom/recovery will be.
Before deciding who will be responsible for paying the unsecured debt, both parties need to identify what those debts are.
- · Are they from credit cards, lines of credit or loans?
- · Is each spouse aware of all debts?
- · Are the debts shared, or is one or more in your spouse’s name only?
- · How much is the outstanding balance of each debt?
- · What is the interest rate attached to each debt?
- · Is there a threat of bankruptcy?
It is highly recommended to order a joint credit report from one of Canada’s trusted Credit Bureaus, like Equifax or TransUnion. Only then will you have an accurate account of all of your debts.
Go through all the credit cards to see what cards are active, in which name they are in, and how much debt is owed on each. Once this has been determined, STOP making purchases on these cards. Continued purchasing on cards you are endeavoring to settle will only complicate matters with your divorce. A good idea is to apply for an entirely new credit card from a different credit provider.
Now comes the fun part. Who is going to pay the debt? You could tackle this in a number of ways:
- Split the debt in half and each take responsibility for paying off your assigned half;
- Pay the debts that are in your name only;
- Make a trade, one spouse pays for all the joint debt in exchange for more of the shared assets
Whatever you agree to, ensure that your lawyers are aware of your agreement and get it writing. In most cases, your lawyer will advise you to resolve your shared debt pronto, so as to not prolong the divorce settlement process. For professional assistance with resolving your debt, it is recommended you contact a credit counselor or debt relief firm right away. Most will offer a free financial assessment in order to tailor a repayment plan that suits your financial needs.Resolving your divorce is stressful and complicated enough to live through. Your finances should not be an additional burden..
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