During property division in a divorce, it is common for parties to forget or give little importance to debts compared to assets. However, understanding the allocation of marital debt and how to handle it are vital to achieving a fair and equitable division of marital properties.
Here are three strategies that divorcing parties often use to handle debt during a divorce:
- Debt assumption and indemnification: With this strategy, one party may agree to take on more debt in exchange for a greater share of assets or some other consideration. This debt assumption usually comes with indemnifying the other party from any future liability related to that debt.
- Refinancing: Parties can also agree to refinance certain debts, such as a mortgage, to ensure that only one party’s name is on the loan, making that person solely responsible for the debt. This is often coupled with that spouse keeping the asset associated with the debt.
- Selling shared assets: Sometimes, the simplest solution is to sell shared assets and use the proceeds to pay off joint debts. This strategy provides a clean break when it comes to financial ties and can help both parties start fresh post-divorce.
Determining which strategy is suitable for a certain divorce case will greatly depend on the unique circumstances of the case, the goals of the parties and their willingness to pursue a certain strategy.
Which strategies are right for you?
Every aspect of property division has a significant impact on your life after divorce. Hence, it can be beneficial for you to use the right resources and find a dependable legal representative to guide you throughout the asset division process. This ensures that your property rights, including proper debt allocation, remain protected.
