Spouses preparing for divorce often have to think about what assets they hope to keep. Dividing their property is a necessary element of divorce. Unfortunately, many people preparing for divorce overlook one of the most important financial considerations.
They become so fixated on asset retention and protection that they fail to give proper consideration to marital debts. Financial obligations taken on during a marriage are usually the responsibility of both spouses. Even debts held in the name of one spouse may ultimately be the responsibility of both.
Debts accrued during a marriage with the intention of supporting the family unit are typically part of the marital estate and can play a major role in the property division process. When spouses address these debts, they need to be careful about protecting themselves from a commonly overlooked risk.
Family court orders aren’t a panacea
People frequently assume they don’t have to worry about financial responsibilities allocated to their spouses during divorce. If a judge orders one spouse to pay a child’s medical debts or household credit card balances, it is natural to assume that the person subject to that order should follow through.
Especially when there was a court order making their financial obligations clear, the other spouse may trust that they should fulfill their responsibilities. Unfortunately, the family court order only allocates responsibility. It does not necessarily terminate the financial responsibilities of the other spouse.
Particularly in scenarios where the spouses co-signed for the debt, such as when they opened a joint credit card account, the other spouse could still be liable for the debt in the future. If the spouse ordered to pay the debt defaults, dies or files for personal bankruptcy, creditors could take action against the other spouse.
While it may be possible to hold the spouse ordered to pay accountable for violating a family court order by going back to family court, the civil courts are unlikely to absolve someone of their financial obligations simply because of a property division decree. People have to protect themselves from the possibility of future financial abuse.
Some people prefer to assume debt from the marriage on their own because they know that they can make payments on it and can then secure more of the marital estate as well. Others may try to use marital assets to pay off those debts during the divorce so that there aren’t concerns about defaults in the future.
Reviewing household finances carefully can help people determine what issues may complicate property division proceedings in an upcoming divorce. Paying close attention to debts in addition to property can help people avoid financial setbacks and legal complications in the future.