Avoiding financial problems during a divorce may be the biggest challenge anyone has to face. All debts as well as all properties must be accounted for and divided reasonably. This includes tax liabilities on property, insurance policies, and any investments jointly held.Â
Property taxes and mortgages default to the one who keeps the property unless otherwise agreed to in the divorce papers. That should be taken into account when one negotiates for ownership. If there isn’t enough income to meet these obligations, another solution should be found or the owner could face losing the property at a future time.Â
Other debts work the same way. For instance, a vehicle comes with its payments and insurance included. Enough income must be available to meet those payments, and should be a serious factor in deciding ownership. It works the same way as anything else: If it can’t be paid for, it can’t be owned.
It may be hard to have to buy an older vehicle or live in an apartment, but realistic decisions must be made to avoid going deeper into debt and possible bankruptcy.Â Credit card debt or unsecured debt can be a stickler because if both parties used the same credit card over a period of time it becomes impossible to know how much outstanding debt belongs to which partner. To avoid that, each partner should have their own credit card regardless of income or other circumstances. This might not be the case at the time of divorce, and that could take some time to negotiate a fair division of costs and ownership of the cards. The debt can be divided according to who has the higher income or who will have more expenses after the divorce. It’s difficult to be fair minded about credit card debts, but it will be to the benefit of each partner if they can see their money situation with a minimum of emotion.Â
When dealing with all of this money can seem to vanish for both parties. One way to minimize that is to use pen and paper, a tight fist, and some cooperation. A list of everything owned and everything owed should be available whenever debts are negotiated, although a truly fair division is seldom reached. A stricter budget will no doubt be required and some lifestyle adjustments will surely be in order.
Lauralynn Schueckler is the Online Marketing Specialist at Advantage Credit Counseling Service. She is the author for Advantage CCSâ€™s Blog called Dollars & Sense. Advantage Credit Counseling Service is a member of the National Foundation for Credit Counseling. Contact Advantage Credit Counseling at 866.699.2227, or visit them online at www.advantageccs.org.
Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.