Things to Know Before Dividing Marital Debt
When you are drafting a prenuptial agreement, or if you are negotiating a marital settlement agreement, when it comes to property, there may be a lot of fighting over who gets what. Everyone wants items of value (or payouts to represent what the other spouse is getting). Often however, little thought is given to debts and liabilities and to who will pay them.
Debt as a Negotiation Tool
One of the good things about resolving your divorce amicably without the need for a trial is the ability to negotiate back and forth. Debt can be a valuable tool in those negotiations by balancing out things given to the other spouse.
For example, assume there is a car that is fully paid off, and the wife wants it. Her husband can agree to give it to her, in return for the wife taking on responsibility for marital debts that equal (or roughly equal) the husband’s financial interest in that car.
The same negotiations can be made for alimony. Many couples agree that one spouse will pay less alimony in return for accepting a larger part of marital debts.
Creditors Aren’t Bound
One thing that is often overlooked in these negotiations is that your creditors are not bound by your divorce agreement. If the husband and wife have a joint Chase credit card, and the divorce agreement says that the husband will pay it, Chase is not bound to only pursuing the husband for the money—the wife is still legally on the hook and can be sued for the debt with the husband.
This can leave a spouse with a troubling choice: Pay the debt the other spouse agreed to pay, or else risk damage to credit ratings, lawsuits, and everything else that comes with unpaid debt.
Homes and Mortgages
Homes are a huge issue as well. The mortgage company does not care that you have a divorce agreement saying your ex-husband will pay the mortgage. If he does not pay, you and anyone living in the home (including children) will get foreclosed on.
You may also face a second problem—if your spouse’s name and not yours is the name on the loan, the bank may even refuse to speak to you. You may not even know until you are served with foreclosure papers as a result of your ex not paying the mortgage as he said he would in your settlement agreement; and, because you are not on the loan, even if you wanted to try to modify the loan or fix the problem, the bank may not even deal with you.
That’s why it is vital to know which spouse is on the loan and the mortgage before starting negotiations.
Don’t hesitate to reach out to our Tampa family law attorneys at the Pawlowski//Mastrilli Law Group for a help and advice about negotiating a divorce, or trying your divorce case in court. We are eager to assist you throughout each step of your case.