When considering the financial aspects of a New York divorce, spouses should not overlook the issue of debt. Just as assets are divided during property division, so too are the debts accumulated within the course of the union. The manner in which debt is handled during divorce will play a significant role in the financial stability of both spouses in the years to come.
Perhaps the most important thing to realize is that one’s divorce agreement is of no concern to creditors. In the eyes of a credit card issuer or other creditor, the parties listed on the account are jointly responsible for repaying the debt, regardless of the agreement they may reach during the course of their divorce. Therefore, if one spouse agrees to assume a given debt and fails to repay that obligation, the creditor can and usually will pursue the other spouse for repayment.
The best way to avoid this fate is to pay down as much debt as possible before the divorce is finalized. In some cases, this will require dipping into savings or selling off an asset. However, the peace of mind that is gained holds a value in and of itself. Knowing that these accounts are paid off and closed can help one move forward without worries that the matter will arise at a later date.
When considering how to structure the division of debt during a New York divorce, spouses must take a big-picture approach to their current and future financial standing. Whenever possible, paying off as much debt as possible prior to the property division portion of a divorce is the best course of action, even if it means depleting savings or liquidating assets to do so. The ability to move on without fear of future credit damage has a value all its own.
Source: Fox Business, “Debt and Divorce: 5 Steps to Make a Clean Credit Split“, Dawn Papandrea, July 14, 2014