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Divorce and debt: Who pays?

Debt can feel like a drag and divorce can really sting. What happens when the two combine forces of pain? According to NerdWallet, the average American household owes approximately $135,000 in debt on average. Assets are divided through divorce, and, unfortunately, so is the debt. Who pays the debt and how do you protect yourself if the debt is declared to be the responsibility of your ex?

The answer can depend on who owes the debt and what kind of debt is owed. Like the full range of credit scores, your financial and marital situation will make your divorce unique. No two divorces are alike, so it is important to seek the help of a family law attorney early in the process. Estranged spouses can make verbal commitments to your finances, but all that could change as the divorce progresses.

What kind of debt is it?

Debt takes on two forms in both unsecured and secured debts. What's the difference?

  • Unsecured debt - This sort of debt is associated with credit cards and other high-interest, consumer-level spending. Failing to pay back this debt can hurt your credit score.
  • Secured debt - These loans protect large assets such as your home and car. The loans are "secured" by collateral such as the home or the car itself if you fail to meet your obligation to pay. A bank can repossess these assets, but there are protection methods available.

How can I deal with debt during divorce?

Now that we know the differences between obligations, we can better look at how to manage it after divorce. The way you and your soon-to-be-ex handle unsecured and secured debt might differ both before and after divorce.

  • Unsecured debt - If you and your spouse both have your name on a credit card account, you both are responsible for the debt. How this debt is paid can be considered in the divorce decree.
  • Secured debt - Let's say you and your spouse both have your names on the mortgage and the car loan. However, after divorce, you keep the car, and your spouse gets the house. Since an asset is no longer in your possession, you probably won't feel obligated to pay for it. According to Huffington PostĀ remains a popularĀ option for spouses who split, and doing so may be written into the divorce decree by an attorney.

Remember, no two divorces are similar because of the differences in financial and child custody arrangements. It is important to consult with an attorney before making any major financial decision or expense during a divorce because he or she will understand how to apply the law to your situation.

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