The process of separating households during a divorce requires many complicated financial conversations. Spouses have to decide what should happen with their property. They also have to make decisions about their debts as well.
Financial obligations are an important consideration when resolving property division matters in an Ohio divorce. Debts can help balance out uneven income or the overall distribution of marital property. Spouses may find themselves worrying about their debts and how to properly manage them during a divorce.
What issues and concerns may arise as spouses attempt to divide their marital debts?
Concerns about which debts are marital
Some spouses may have debts from before they got married that are their separate responsibility. They’re pre-existing student loans, for example, remain their separate responsibility even after they divorce. Typically, debts assumed during the marriage are part of the marital estate. Even credit card balances in the name of one spouse are potentially subject to division.
The main exceptions to this rule are debts taken on to diminish the value of the marital estate or debts actively hidden from one spouse. Acts of financial and romantic infidelity can lead to the spouses excluding certain debts from the property division process.
Fear of financial overextension
The idea of maintaining a separate household while also assuming responsibility for marital debt can be quite intimidating. People may fear the possibility of becoming insolvent. They may therefore need to consider very carefully the options available for addressing marital debt. They may want to use marital assets to pay off shared debts instead of maintaining those financial obligations after the divorce.
The possibility of a spouse defaulting
Even if spouses agree to divide marital debts a certain way, there is never any guarantee of compliance. The spouse ordered to pay a debt might fall behind on their payments. They might even file for personal bankruptcy to permanently avoid financial responsibility.
In such scenarios, the other spouse may face collection activity and financial stress. The order issued by the family courts can lead to enforcement efforts later. However, they are unlikely to influence debt collection efforts and civil court proceedings related to a default or personal bankruptcy filing on the part of one spouse.
Understanding why that can be a major complication during property division negotiations can help people better protect themselves. Those who take an informed approach to both property division and debt allocation can potentially move on more effectively after the end of a marriage.