These are tough economic times.
America is starting to climb out of the deep financial hole that was caused by the recession of 2007 to 2009. Some people lost so much of their household wealth that bankruptcy was the only option. The rest of us survived by running up substantial credit card bills, relying on home equity credit, or applying for second mortgages. Still, the average U.S. household lost almost two decades’ worth of asset growth.
The strain of this financial catastrophe has led to an equal strain on some marriages. Financial disputes are a major reason for divorces in North Carolina.
You may already be aware that as a part of the divorce process, the court will divide joint household possessions, called marital assets or marital property, between the spouses. This is supposed to be done in an equitable—or fair—manner, which may not require an equal division of property.
What many people don’t realize is that at the same time, the court will also divide the couple’s joint debts. Although many judges will divide debts 50/50 between the spouses, this also is supposed to be done “equitably,” so it is possible one spouse may end up with most of the property and the other spouse be assigned most of the debts from the marriage.
Four key tips for dealing with debt issues after a New Hanover County divorce
Before you proceed with a divorce, you should recognize some of the potential pitfalls and complications that await you. Our Wilmington marital asset attorneys find that the following four issues come up most often:
- Like assets, some debts are separate and some are marital. Marital assets and debts are divided in the divorce order. Separate assets and debts belong to only one spouse, and the court will not divide them in a divorce settlement. That low-interest personal loan your husband got from his parents before your marriage in order to open his dental practice is likely to be considered a separate debt that remains solely with your husband after the divorce. Some debts can be either separate or marital, depending on the circumstances—student loan debt is a good example—and your North Carolina divorce attorney may need to persuade the judge how to classify certain loans.
- You need to untangle your credit history from your spouse’s right away. Work on this immediately. Cancel all joint credit cards. Obtain a copy of your credit history and review it with your financial planner and North Carolina divorce lawyer to see if corrections are needed.
- Be aware that creditors can still pursue you for debts that your spouse is responsible for. If you both signed the mortgage agreement or credit application, the creditor can try to collect from either one of you after the divorce—even if that debt was assigned to your ex-spouse. The creditor has rights, too, and he will generally try to collect from whomever he can find. If you wish to end the dunning phone calls, pay off the debt; then, if necessary, you can take your ex- to court to be reimbursed. If your ex-spouse regularly defaults on paying off the debts, then he can be fined or sent to jail for ignoring the divorce orders.
- Bankruptcy is not a cure-all. Often, one or both spouses will seek refuge in bankruptcy after a divorce. That can be useful in discharging some debt burdens. It’s noteworthy that bankruptcy does not alter either spouse’s responsibility for child or spousal support.
Don’t be left with a mound of debt after your Wilmington divorce
If you are getting a divorce in Wilmington or the surrounding areas, don’t emerge from the process with no assets and a pile of debt. Call the Speaks Law Firm toll-free today at 877-593-4233. Our experienced New Hanover County divorce lawyers can help with all aspects of the process, including friendly guidance on getting a fresh financial start once you’re single again.