Welcome to the eighteenth episode of Divorce and Your Money Podcast. Your host, Shawn Leamon, MBA and a Certified Divorce Analyst, discusses various kinds of debt, such as credit cards, medical bills, student loans, car loans, personal loans, mortgages, and bank overdraft fees.
As with everything else in a divorce, debts are also split, but doing this can be difficult. Shawn will walk you through some of the things you need to do when you are considering debt during divorce.
First, you need to collect all appropriate statements. Whatever debts you have, gather all statements, tally them, and summarize everything. You also need to gather information regarding which spouse is responsible for the debt. In case of a joint account, be sure to also check your credit report.
For dividing debts, you need to know whether you live in a community property state or an equitable distribution state. Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin are community property states, and you are also responsible for the debt of your spouse. If you live in an equitable distribution state, if one spouse incurs debt during the marriage, it is their responsibility unless they had a joint account.
If you and your spouse are separated, the date of separation is important, as after the official date you are only responsible for your own debts in a community property state. You need to pay down as much debt as you can while you are still legally married. Take care of any outstanding debt from your joint accounts, especially as it might cause trouble for you as long as your name is on it. It has to be discussed and split the same way as all other assets.
Key Learning Points:
- As with everything else in a divorce, debts are also split.
- Debt includes credit cards, medical bills, student loans, car loans, personal loans, mortgages, and bank overdraft fees.
- Collect all appropriate statements and check your credit report.
- Both spouses are responsible for each other’s debt in a community property state.
- Each spouse is only responsible for the debts they incurred in an equitable distribution state.
- Pay down as much debt as you can while you are still legally married.