Divorce is an emotional process for many. However, it can impact all parts of your life, including your financial situation and stability.
Because of the significant impact it can have, you must understand what happens to the debts you and your former spouse acquired while you were married. Here, you can learn more about this important financial issue.
Separate and marital debt
The first step is distinguishing between separate and marital debt during divorce proceedings. Separate debt belongs solely to one spouse and typically includes debts incurred before the marriage. Marital debt, on the other hand, encompasses debts acquired jointly during the marriage, such as mortgages, car loans and credit card balances.
In North Dakota, marital debt is subject to equitable distribution. This means the court will divide the debt fairly, not equally. Factors considered in this process include each spouse’s income, contributions to the debt and other financial circumstances.
Negotiating debt responsibility
Spouses can negotiate who will be responsible for specific debts during the divorce proceedings. This can be done through a mutual agreement or court-ordered decisions. It’s essential to clearly outline who will pay which debts to avoid misunderstandings later.
Joint debts and co-signing
If you and your former spouse have joint debts, even if the divorce decree assigns responsibility to one party, creditors may still hold both spouses accountable. If you co-signed a loan or credit card with your ex-spouse, you might need to work out an agreement to remove one person’s name from the debt or refinance the loan.
Divorce changes many parts of your life, including your financial situation. Understanding the factors here will help you know what to expect when dividing debt. Knowing your legal rights and options will help you in this situation.