You’ve agreed; you are getting divorced. But, now that your spouse has moved out, the bills are overwhelming. Are you really responsible for everything?
Divorce attorney Thomas Petrelli suggests taking a careful look at the bills. While some bills may be your responsibility there is a good chance that many of your bills are shared debt.
Eight Step Plan for Dealing With Debt During Divorce
- Gather up your bills.
- Sort the bills into two categories: individual debt and joint debt.
- Debts incurred before the marriage belong to the spouse that incurred that debt.
- Individual credit card debt is considered an individual debt if the debt was incurred solely by one party and there was no benefit to the other spouse. This may mean that you alone are responsible for the $500 on your JCrew credit card. However, joint credit cards and credit cards used to pay for the children’s expenses or household maintenance can be considered joint debts.
- Ongoing bills such as phone, cable, and utilities bills are considered joint debts until the date of separation. Amounts billed after the date of separation are individual debts.
- Determine who will be responsible for paying any secured debt. This includes the mortgage and car payments. In most cases, the debt will belong to the spouse who is keeping the property, but there are exceptions.
- Neither spouse can afford to pay the mortgage. In this case, the property will be sold and the spouses will share the net proceeds.
- The spouse with custody of the children will be keeping the home. Each party will pay part of the mortgage and the spouse who is not keeping the home will receive a future lump sum payment for his or her equity in the property.
- One spouse has little or no income because of disability or child-raising or household responsibilities. In this case, the other spouse will be responsible for all or most of the marital debt for a fixed period of time.
- Decide who should pay unsecured debts such as joint credit cards bills and medical bills.
- Divide the remaining marital debt based on each spouse’s ability to pay. Consider each person’s income potential, current monthly bills, and future financial needs.
- Obtain a Court Order specifying who is responsible for each bill. An attorney can prepare this agreement on your behalf.
- Track your spouse’s payments on any joint debt. As long as your name is on the debt, you can be held liable for any money owed. If your spouse is not making payments, you may need to take your spouse to court. Contact your divorce attorney to discuss your options.
- Keep records and receipts for every payment you make towards the marital debt.
Dividing debt is an important part of the divorce process. Your divorce agreement should reflect an equitable division of debts and assets. To learn more about equitable distribution, please call Petrelli Previtera Schimmel at 215-523-6900.