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Important considerations concerning divorce and debt - II

Last time, our blog discussed how both the newly divorced as well as those whose divorce occurred within the last few years need to be aware that their debt repayment obligations may not necessarily come to an end once their divorce is finalized.

In particular, we examined how those who had a jointly held credit card with their former spouse need to be on guard even if their ex- promised to pay off the outstanding balance as part of the final divorce decree.

That's because in the event their ex- fails to make the necessary payments, creditors can still come after them for payments owing to the fact that they were not a party to the underlying divorce.

Fortunately, experts indicate that there are some strategies that the recently divorced can take to protect themselves and their credit scores. In today's post, we'll continue to explore some of these strategies. 

Consider a balance transfer

Even if a former spouse has the best intentions of paying off a jointly held credit card as promised in a divorce decree, the fact remains that they can suddenly find themselves facing money problems due to unforeseen circumstances (job loss, illness, etc.). As discussed above, this means a creditor can -- and likely will -- come after the other spouse.

Experts indicate that a person can avoid this danger by having their former spouse actually assume the debt, meaning it is transferred to a new individual account via a balance transfer. Conversely, experts indicate that a person could also take steps to assume the debt themselves, as it would ensure timely payments and help protect/build credit.

Any assumption of debt, say experts, would likely need to be offset by some sort of property division arrangement (i.e., a larger percentage of marital assets).

Try to settle the debt at the outset

Experts indicate that, if possible, divorcing spouses should strongly consider just paying off any jointly held debt prior to signing the final divorce decree, as it can serve to make both the divorce process and post-divorce life that much easier.

"Debt adds complexity to divorce. The best scenario is to clear debt before the divorce process," said one financial planner.

If you would like to learn more about the divorce process, including your rights and your options concerning property division, consider speaking with an experienced legal professional.

Source: Fox Business, "Debt and divorce: 5 steps to make a clean credit split," Dawn Papandrea, July 14, 2014

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