Every year, hundreds of thousands of Americans begin the long, often painful divorce process. While many divorces are perfectly agreeable, others can get bogged down in disputes over child custody, physical assets and finances. For many divorcees, however, it’s what happens after a divorce that causes the most financial and emotional pain. Learn more about how divorce can dramatically affect your credit report.
Common Debts in Divorce
Spouses or civil partners may accrue jointly held debts for many different reasons. Debts that are most often held “in common” include:
- Mortgage loans
- Auto loans
- Credit cards
- Business loans or lines of credit
Indeed, spouses who jointly own a business may be especially vulnerable to the accumulation of post-divorce financial burdens. It’s also important to note that spouses who receive full custody of their children are often granted ownership of the family home. If there’s a significant balance outstanding on said home’s mortgage, this could set up the custodial parent for a significant financial burden.
It is important to decide if it is worth keeping an asset and its associated debt when making divorce agreements. It is helpful to make a detailed budget to assist with the decision making process. Sometimes it may be wise to sell an asset and relieve yourself of the debt or agree to let your spouse have the asset if he or she can refinance the loan to remove your name.
Default, Bankruptcy and More: Potential Fallout
Divorced spouses who must take on major marital debts without attendant support or additional income may face tough financial choices. In many cases, these individuals must choose between supporting themselves and carrying expensive obligations for years on end. Every year, thousands of loan defaults and bankruptcy filings can be directly attributed to post-divorce divisions of assets.
Unfortunately, defaulting on any obligation can seriously damage your credit report and make it much more difficult to obtain necessary credit in the future. Declaring bankruptcy can have an even more dramatic effect. It is critical to assess your ability to pay debts before agreeing to any division of those debts in your divorce.
An Indianapolis, IN, Attorney Who Understands Divorce
Many parties to the divorce process fail to grasp the financial significance of this undertaking. Given the very real emotional issues that infuse divorce, this is entirely understandable. If you’re going through a divorce, however, it’s crucial that you take a step back and determine how the endeavor will affect your credit report. Don’t hesitate to lean on the advice of the trustworthy team of experienced divorce attorneys at Garrison Law Firm. You can reach us at (317) 842-8283 or visit our family law practice page.