Disclaimer: This blog does not constitute legal advice. If you have any questions about your individual situation, it’s best to seek the advice of an experienced legal professional.
During a divorce, it’s common to focus so much on the division of property and child custody that couples sometimes forget debt is also an issue to consider. Your divorce mediation process will require you and your spouse to acknowledge all the debts that exist and make a plan for who will handle them. Understanding how this process typically works can help you make better decisions during divorce mediation. Here’s a general overview of debt and divorce from the financial and legal experts at Divorce Options San Diego—experienced professionals who provide premier San Diego divorce mediation services to couples seeking creative divorce solutions.
What Living in a Community Property State Means
California is a community property state, which means any assets and debts you accumulate during the marriage are typically viewed as both spouse’s responsibilities. For instance, a creditor can hold you responsible for a car loan your spouse agreed to without your consent. Assigning responsibility for debt after your marriage is dissolved is an essential part of your divorce mediation that protects you from being liable for unpaid debts that were accumulated during the time you were married.
How Creditors View Debt During Divorce
Creditors are usually not concerned with which spouse pays a debt. These companies and individuals simply want to get paid back. Trying to tell a credit card company you won’t pay a bill because your spouse has been using it while you were separated simply doesn’t work. For this reason, you need to carefully track your debts and payments as you proceed with your divorce to make sure they’re distributed properly during mediation.
Understanding Secured vs. Unsecured Debt
Secured debt involves loans where you have some type of property with value that can help you pay it down if you’re unable to honor your credit agreement. Cars, houses, and other pieces of physical property are often considered secured debt because a lender could repossess them if necessary. Unsecured debt represents types that don’t have something viewed as valuable to the lender. Credit cards and personal loans often fall into this category. Knowing which type of debt exists can help you make decisions about who should be responsible. For instance, the spouse who has more financial security may be the better person to take on unsecured debt, since he or she is less likely to encounter issues with making the payments.
Paying Off Debt with Assets
If possible, paying off debt during the divorce proceedings is one of the most effective ways to make both parties happy. You and your spouse may need to sell off some assets, such as an unnecessary car, for money that can then be put toward paying off a debt. Having fewer open accounts also streamlines the mediation process.
Protecting Your Credit During and After a Divorce
As you assign responsibility for each debt, you need to make sure you’re fully aware of which debts are your responsibility. In some cases, you may need to continue paying on a shared debt throughout the mediation proceedings to keep your credit history free of bad marks. Once the responsibility for debt is assigned and approved by the court, make sure to remove your ex-spouse’s name from any unshared accounts so you retain complete control over your credit.
The mediators at Divorce Options San Diego are all certified financial planners who apply thorough analysis to your divorce to achieve an optimized result that will cover all aspects of your financial situation, including investments, property, and all other assets or debts. All the practical, legal, financial, and psychological aspects of fair, respectful divorce agreements can be managed by Divorce Options San Diego’s experienced, trustworthy San Diego divorce mediators. Couples can rely on our comprehensive process, which is so thorough there won’t be a need for attorneys. Give us a call today at (858) 281-2628.