How debt may affect a divorce
Missouri spouses who divorce commonly have to decide how to divide any assets acquired during the marriage as well as address child custody or support issues. Further, it is now becoming more common for them to have to decide an additional issue as property division now requires that spouses assign debt acquired during the marriage.
With assets such as a car or the house, the liability belongs to all persons who sign the loans, regardless of who keeps the asset. The lender has a right to hold either spouse liable for repayment of the debt and is not bound by a divorce judge’s order. There is usually a clause in consumer loan agreements requiring consumers to notify the bank if there is a change in their lives such as divorce. The lender can then review the options for allowing one spouse to take over any joint loans.
Joint debt leads to problems when one spouse will not agree to take full responsibility for a jointly acquired debt or does not qualify for the loan individually. Many banks may not agree to convert a loan from a joint debt to a sole borrower debt as there is no law that requires them to do so. One option to avoid this problem is to use marital assets to pay marital debts if possible. Another option is to seek to refinance the loan with another bank, which could offer a fresh start.
One of the best ways to reduce the time and expense associated with divorce is for the spouses to reach an agreement on these important issues prior to filing the paperwork. A Missouri divorce attorney may be able to review a spouse’s financial situation and advise him or her regarding asset division and other practical divorce matters.
Source: Business Today, “Till Debt Do Us Part: Divorces? Here’s how to settle debt smoothly,” Chandralekha Mukerji, March 2013