Handling Your Debt Problems When Dealing with a Divorce

A divorce alone can exhaust your resources and energy tremendously. If you are already dealing with debt problems, the divorce process can become an overwhelming financial burden. Nonetheless, it is very important to do all you can to get out of debt and stay above water during and after a divorce, both from a financial and a psychological perspective. While debt problems may seem insurmountable during such a straining time, there are quite a few resources available for people in your situation.

Divorces Caused by Debt Problems

According to a major study by the Creighton University Center for Marriage and Family, money is one of the top three factors in the dissolution of young marriages. For the financial aspect of a marriage to work, both partners must be on board with all spending decisions, and money must be managed in a fair and equitable manner. When either partner spends irresponsibly or runs up a large amount of credit card debt, feelings of resentment can build up between the couple to the point that they ultimately become irreparable.

When going through a divorce caused by credit and debt problems, the key is to realize those financial difficulties will not end merely because the marriage has been dissolved. You may not have to see your ex again, but bills, notices, and statements from lenders will continue to appear.

A Tangled Web of Credit Card Debt Problems

One of the most important and potentially expensive aspects of a divorce is dividing property. This process applies as much to the distribution of debt responsibility as it does to the distribution of goods.

When a divorcing couple has had any joint credit accounts, it may be difficult to figure out which party is responsible for paying off which bills. It is vital to the proceedings to have detailed records of what items each of you purchased on credit, as well as the purpose for each purchase.

When considering the assumption of debt responsibility, each party will likely have to make concessions. This process of sorting things out is complex, and it is potentially a source of great debt risk and responsibility for both of you. Be sure that both parties are satisfied with the end result rather than risk further costly litigation.

That process starts with open and frank discussion, but also requires verification. Start by getting a handle on exactly how much is owed—and do not trust your spouse to provide all the information. Run a copy of your credit report to get an exact figure and to find out if there are any accounts your spouse never told you about.

Once all the debts are on the table, you can decide who is responsible for what—though it's more complex than simply dividing it down the middle. If there are assets involved as well, the division of debt may need to be adjusted to accommodate a spouse who wishes to retain control over an asset, such as a car. In an adversarial divorce where there may be little trust, you may also wish to follow up by freezing your cards to make sure your spouse does not add more debt after the division has been made.

Even after you have reached an agreement about how to divide up debt, that's not the end of it. If your spouse has agreed to pay a particular account, creditors are not party to that agreement and will still try to collect from one spouse if the other does not pay. While the creditors will go after whoever they think is able to pay regardless of any divorce agreement, it's still a good idea to make contact with each one to explain the situation and negotiate a possible payment schedule.

Turning Divorce Debt Problems into Opportunities

A divorce is a new opportunity for each party to make a new start in life. Similarly, it is a perfect opportunity to change spending habits, clean up financial debt, and give your conscience room for other concerns besides money.

Although you may no longer have the advantage of a combined income, the resolution of debt problems can be much simpler when there is only one person involved. Credit counselors will appreciate having a single, concise account to deal with, you will have complete control of what payments to make, and no one will be transacting on your accounts except you. Now is the time to take a few positive steps towards re-establishing your credit and your own personal financial identity by following a few simple tips:

1. Remove your ex's name from the accounts that you have agreed to maintain. Close all other joint accounts as soon as possible, and establish accounts in your name only.
2. Monitor your credit report on a regular basis to make sure your finances become completely separate from those of your ex-spouse.
3. Most major assets should be sold and the proceeds divided. Alternately, if your spouse retains a major asset, make sure that your name is removed from ownership.

Sooner Is Better for Getting Your Debt on Track

In any situation, credit card debt problems are better handled sooner than later and a divorce is no exception. When going through a divorce, it may be tempting to put off your need for financial restructuring until after the painful divorce process is over. However, you may be missing an opportunity to get organized for the future.

Even without a completed divorce and the agreement stating what is yours and what is not, credit counselors can help you to sort things out and get everything in place for when you are legally free. With a better understanding of your big picture, it will be a much simpler and effective process for them to help you start to get everything back on track.