Every divorce process involves sharing of all the assets and liabilities. It includes assets and liabilities the couple acquired during their marriage and even those before the marriage. It means, the assets and liabilities titles individually in your name or jointly with your better half.
Why is it essential to compile a list of every asset and liability in divorce cases?
A list of all the assets and liabilities allows the court to establish a fair divorce settlement. In case, you falsify or omit information intentionally then there can serious allegations like contempt of court. Every state has its own laws to divide the assets and debts. Even a prenuptial agreement influences the decision. However, in Illinois ‘equitable division’ means a division of marital assets and liabilities. If a spouse has inherited an asset or was gifted property during marriage then it is regarded as non-marital possessions and is not subjected to allocation.
There are still some exceptions, which your lawyer will tell you about during consultation. Schaumburg asset division attorneys from Fedor Kozlov, P.C. law firm are great negotiators and ensure that their client’s monetary interest stays protected and there is financial stability even after the divorce.
Common asset list will include –
- Shared & personal bank account
- Real estate
- Retirement accounts
- Commercial properties
- Recreational vehicles
- Life insurance policies
- Personal property
- Intellectual property
- Bonds & stocks
Common liabilities include –
- Home equity loans
- Mortgage loans
- Unpaid medical bills
- IRS debts
- Credit card bills
- Personal loans
- Car loans
- Student loans
The list is exhaustive, these are some illustrative examples. Your lawyer will help you with how to allocate marital assets and liabilities. The problem lies in dividing the liabilities or debts, so let’s understand debt categories that impact a divorce.
Debts that impact a divorce
Unpaid credit card bills
Joint credit card liability differs from one state to another. The majority of states regard it to be a marital debt accumulated during the marriage. It doesn’t matter, whose name is on the account or who was paying. Both are liable for credit card debts during the divorce.
The simple solution is to agree to sell the house and divide the cash. Even if it is advised to keep a place for the kids, selling and splitting will be a great way as it allows both a clean getaway. To sell the home there can be delays, so make an agreement with your spouse temporarily on how much each one will pay against the mortgage. It helps to protect the credit scores of both parties.
Another solution is to buy a spouse out or vice versa. Generally, mortgage debt is allocated to a spouse whose income is more or to the one awarded with full child custody. In such cases, one spouse will buy the other’s spouse’s home equity. If there is a mutual agreement that one spouse will keep the home then call the mortgage company and have the other party’s name removed from the loan agreement. Sometimes the mortgage company doesn’t agree to remove the name. In such a case, refinance the name with the interested party’s name.
Joint names on car loans are a real issue in divorce matters. If even a single party refuses to pay, the credits of both suffer. In case, a single spouse is held responsible to pay the joint debt after a divorce, then there are chances that payment can be ignored. As the other spouse is a co-signer, both will get hooked for late fees, collection costs, or default.
The best strategy is to insist on automatic payment from the other party’s account. Another way is to ask for a car refinance in your name only. If you are unable to pay monthly car loans, and there are no alternatives to pay the debt before a divorce, people often trade the costly car with a manageable model based on their new budget.
Illinois is an equitable distribution state, so the court considers when medical debt occurred. Or, was the couple living together, and even how the medical debt will impact their kids if any. Remember, a divorce agreement will not replace loan agreement terms.
If your ex-spouse……
· Doesn’t pay divorce debt
If the spouse made responsible for joint debt payment following a divorce ignores that payment then as a co-signer you are also on the hook for delayed fees or default penalties. Creditors are not aware of the divorce. They are adamant about their loan repayment.
Therefore, include a coverage clause in the divorce agreement. It helps you to file a court petition during loan payment defaults asking the court to demand that your ex-spouse follows the divorce agreement terms. This can cause your ex to experience jail time or pay significant penalties.
· Files a bankruptcy
It can be because they cannot handle joint debt payments but this can impact you badly. Bankruptcy will not protect you if you were not involved in filing it together. It does not wipe away a joint debt when one ex-spouse files for bankruptcy. It erases the liability of the ex-spouse who filed for bankruptcy.
Therefore, the debt is not eliminated in bankruptcy court. The creditors can pursue the debtor who did not file for bankruptcy and that too for the entire amount. Bankruptcy will undoubtedly appear on your credit history even if you did not file.
A word of caution – Ensure to close every joint credit line and card. There is a possibility your balance can increase leaving you responsible for purchases or there can be a transfer of balances from a joint account. Even protect Social Security Number or you may be liable for deeper financial liabilities.
Best solution associated with debts
The best way is to pay every joint debt before finalizing a divorce. It may not be possible all the time, so responsibilities are divided. For example, one handles a home mortgage loan, while the other will make car payments. The issue arises when one or both are unable or refuse to pay. The credit card companies, mortgage firms, and lenders are not subjected to divorce decree. They pursue the couple for their money.
The solution is to put a complete stop to the joint accounts. Close them and refinance a car, house, or other loans with an individual name. Cancel every joint credit card and have a debit card transferred to each one’s name.
Maintain a civil relationship because it is helpful to organize the finances properly without hating one another!