As Arkansas couples prepare to end their marriage, they will need to negotiate the division of their assets and debts. Like the division of assets, dividing debts can be a complex process, and the liability is often misunderstood.
Types of debts accrued during marriage
The longer the marriage, the higher the probability that couples have commingled their finances and have accrued marital debt. If the marriage ends in divorce, there will be questions about who should pay for that debt. Some of the types of debt couples might accumulate during marriage include:
- Auto loans
- Credit card debt
- Personal loans
- Student loans
- Medical debts
Dividing and paying for marital debt
The way debt is divided during divorce will depend on a variety of factors, including the state you are in, who signed for the debt and when the debt was accrued. In some states, debt accrued before the marriage or after the couple separated will be considered individual debt and the liability will rest with the person who signed for the debt. Marital debt is generally any debt incurred during the marriage. During divorce negotiations, marital debt might be divided, or one spouse might be assigned to pay off specific debts. However, if that debt was in both spouses’ names, they will still both be liable for it in the creditor’s eyes.
What you can do
The best advice is to try to pay off joint accounts and close them before the divorce. With mortgages, if both spouses are on the loan, they can sell the property, pay off what is left of the mortgage and split any proceeds. They can also choose to have one spouse refinance in their name.
Being cautious before the divorce might save you financial stress after the divorce. It is important to understand that your credit standing will be affected if your ex-spouse fails to make payments on the joint debt they were assigned during the divorce settlement.