Dividing Debt Before Divorce
By James Walsh
Divorce is not only an emotionally draining process, but also financially debilitates people. More than 4 out of 10 people have said that breaking up has caused them more financial strain than loss of work, ill health, or bereavement. People who divorce report that they are not only losing their savings, but (more than 30% of them) are also landing into heavy personal debts. Such a situation arises because divorce divides your property and your debts too.

All mortgages acquired by you, prior to your marriage, are your individual responsibility. However, those debts you obtain jointly after your marriage get divided. Debt division means you will be held responsible for your share of debt. Usually, both the partners co-sign a debt and both are held responsible for the repayment.

Debt sharing is, therefore, not easy. You have to consult your lawyer to avoid getting mired in the financial implications of the divorce settlement.

Dividing Debts

One of the easiest manners of division is receiving an item along with its associated debts. Alternately, you can divide debts in proportion to your current earning capacity. Those who end up with a larger share of liquid assets like bank account, rents, and insurance premiums might also receive a higher percentage of debts.

If your partner takes the marital home, insist on a clause that requires him or her to refinance the mortgage so that you are relieved of future debts.

If you own a joint credit account, you can close it or convert it to individual accounts. The creditor cannot close a joint account because of the change in your marital status, but it can be closed at the request of either spouse. If you are requesting for changing the joint account to individual accounts, the creditor will ask you to reapply for credit on an individual basis. Based on your new application, you may be given or denied the credit. If you are given the credit, you will be made responsible for your individual account.

Finally, if your spouse is contemplating filing for a bankruptcy, you must meet your lawyer to take measures to protect yourself. (10% of the divorcing people find it so difficult to manage their debts that they consider declaring a bankruptcy.) You should not be stuck with debts, after the finalisation of divorce. Many people also decide to opt for ‘Individual Voluntary Agreement‘ (IVA) which is an easier alternative to bankruptcy.

Handling Debts

Debts are such a great source of strain during divorce that you may sorely feel the need for professional help to manage your finances. Only 8 out of 100 Britons have been able to manage their financial issues and reach amicable divorce settlements. The rest know not where to turn for advice. The need for free debt management services is sorely felt.

You can handle your mortgage clearance by negotiating a new and lower interest rate with the lender or you can try saving money by paying the most expensive debt first. You can decide upon your options by seeking debt counselling.

Debt counselling helps prevent a spiralling down deeper into debts. Usually, many people borrow from other sources to repay their existing debt and thus sink deeper into loans. ‘The UK Insolvency Helpline‘ which is a free national debt advisory organisation helps prevent such circumstances by giving people support and the required advice on debt management.

Money is the most contentious issue between marital mates. Yet, many couples say they rarely discuss money matters prior to their marriage. Such ambiguity surrounding the financial aspect makes money matters a hotly debated and contested issue during the marital tenure, and drives couples towards contemplating a divorce.

Whenever you ponder divorcing your spouse, the first precaution you need to take pertains to your financial realm. Separate your finances. Close down all joint bank accounts and cancel your joint credit cards. Withdraw the authorisation you have given your partner to spend on your account and take all other measures to protect yourself from the charges your partner will make on your name. (15% of people in the UK say that they purchase expensive gifts for themselves on their partner’s account when divorce is in the offing.)

In light of such facts, it is vital you discuss money matters during the days of your courtship. Knowing the financial views and conditions of each other mitigates marital clashes and qualitatively enhances marital life.

Article Source: http://www.ArticleJoe.com

James Walsh is a freelance writer and copy editor. If you want to find out more about a solicitor managed www.managed-divorce.co.uk“>divorce see www.managed-divorce.co.uk