Protect Your Future By Dealing With Debt Before Your Illinois Divorce

 Posted on February 18,2021 in Division of Property

Divorce is an emotionally and financially complex process that affects around 800,000 Americans each year. Sadly, some studies estimate that a person’s net worth could be reduced by as much as 77 percent by the time their divorce decree is finalized. The good news is that this is not always the case. In fact, those who plan and prepare effectively for divorce often fare better than those who do not.

Start by Taking an Honest Look at Your Debt

You may have heard about how important it is to account for all of your assets before your divorce. This is true, of course, but it is often just as important to carefully examine your debt. After all, debt is not going to simply disappear once the divorce is over. Instead, any debt belonging to the marital estate will be distributed between you and your spouse, much like your assets will be. However, there are often additional complexities when it comes to dividing debt. For example, mortgages and other large debts may not be as easy to “split” because the lender or extender of credit may not be willing or able to remove one of you from the account.

At first glance, this might not appear to be much of an issue, but it can be problematic. For example, if you attempt to obtain a new line of credit, such as while trying to buy a car or a new residence once the divorce is over, you may have a hard time managing your debt-to-income ratio. Alternatively, if your spouse is considered “responsible” for the debt in the divorce but your name remains on it, your credit could also take a hit if they ever default on payments.

Pay Down or Refinance Debt If You Can

If it is within your means to pay down or refinance debt, it might be a good idea to do so before you actually file for divorce. If you opt to refinance, try to do so in a way that assigns each party’s debt under their own name. For example, if you and your spouse have a joint credit card, you could determine how much debt each of you is liable for and then initiate a balance transfer to a card that is only in your name. This can protect both you and your spouse in the event that either of you defaults on your obligations.

Know Your Options If You Cannot Pay Off the Debt

Upon analysis of their financial situation, some couples may realize that their financial situation is shakier than expected. Should you and your spouse face this reality, it is important to understand your options. You could potentially postpone the divorce until you are able to pay down some of the debt, as long as everyone is safe and the marriage is not highly contentious. Alternatively, you could talk with a financial advisor to determine a strategy for reducing debt, or you could consider filing for bankruptcy prior to filing for divorce. Only you can truly determine the best option, just be sure to educate yourself on all of the choices that may be available to you.

Contact Our St. Charles Divorce Lawyers

If you are planning on filing for divorce, contact the team at Goostree Law Group. Our experienced Kane County divorce attorneys will help you understand all of your available options regarding your assets and debts before the divorce process begins, and we will remain at your side to help you protect your financial interests until your divorce is finalized. Call 630-584-4800 to schedule a free consultation today.

Source:

https://www.thebalance.com/dealing-with-debt-during-divorce-960632