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Divorce can be a challenging and emotional experience. Not only that, but the financial implications can last long after the paperwork is done. For many, resolving debt after a divorce is a top priority. Whether it’s splitting credit card balances, car loans, or mortgage debt, knowing how to manage the debt you’re left with can help you regain financial stability. With careful planning and proactive steps, you can tackle post-divorce debt and build a secure financial future.
AND financial advisor can help you create a plan to get out of debt after your divorce is finalized.
One of the most important financial aspects of divorce is the division of debt between spouses. This procedure largely depends on the type of debt and the laws of the country where the divorce was filed.
Courts typically categorize debt as marital or separate, depending on when and why it was incurred. Marital debt, which usually includes joint obligations incurred during the marriage, is generally divided between both parties. Separate debt, on the other hand, is usually the responsibility of the spouse who incurred it.
Keep in mind that even if a court assigns responsibility for certain debts to one spouse, creditors can still pursue both individuals if they held the debt jointly.
Whether you file for divorce in a common law or common law state also affects the division of debt in a divorce.
In community property states, debt incurred during marriage is usually considered community debt, regardless of whose name is on the account. This means that both spouses are equally responsible for repayment. For example, if one spouse runs up credit card debt during the marriage, both spouses may be liable, even if only one benefited from the purchase. Nine States that follow the law of community of property are:
Arizona
California
Idaho
Louisiana
Nevada
New Mexico
Texas
Washington
Wisconsin
Customary law states follow a different set of rules. In these countries, the debt usually belongs to the person whose name is on the bill. However, debt assumed by both spouses, such as a co-signed loanis a shared responsibility.
Because laws can vary by state, a qualified attorney with local experience can be a valuable resource during the divorce process.
The division of debt can also depend on the type of debt. For example, the following types of debt are handled in different ways:
Mortgage debt: If a couple owns a house together, they must decide whether to sell the property and split the proceeds or refinance mortgage under the name of one person. Until the mortgage is refinanced, both parties are responsible.
Car loans: The spouse who keeps the vehicle usually takes responsibility for the loan. But until the loan is refinanced, both names can remain on the account.
Credit card debt: Joint credit card debt is often split between spouses, but individual accounts are usually the responsibility of the account holder. Consolidation or balance transfer can simplify repayment.
A woman explores strategies for getting out of debt after a divorce.
After a divorce, rebuilding your financial foundation requires a clear plan. Addressing debt immediately is one of the most effective ways to regain stability and set yourself up for long-term success. Here are six general steps to help you eliminate post-divorce debt and create a fresh start.
One of the first steps after a divorce is to close all joint accounts with your ex-spouse. Leaving joint accounts open can lead to unintended consequences, such as liability for new charges or missed payments. Work with your creditors to either close joint accounts or transfer them to individual accounts and confirm these changes in writing.
Request a copy of your credit report to get a clear picture of your financial situation. Look for mistakes in joint debt or unknown accounts that she might need to pay attention to. Regularly monitoring your own credit report can help you identify and fix problems early, preventing long-term damage to your credit score. Use a website like AnnualCreditReport.com to get free copies of your credit report.
If you struggle yes manage debtconsider negotiating directly with creditors. Many creditors are willing to work out repayment plans, lower interest rates, or debt settlement for less than the total amount owed. Be transparent about your situation and provide documentation if necessary. These discussions can help you create affordable repayment terms that fit within your post-divorce budget.
Creating a budget tailored to your new financial reality is key to getting out of debt. Start by listing your income and costsprioritizing necessities such as housing, utilities and food. Allocate a portion of your budget to paying down debt, focusing on high-interest debt first. Tracking your spending will help you identify areas where you can cut costs and speed up debt repayment.
Debt Consolidation or refinancing can simplify your financial obligations by combining multiple debts into one payment with a lower interest rate. This approach is especially useful for credit card debt or high-interest loans. Options include balance transfer credit cards, personal loans, or working with a debt consolidation company. Make sure the terms are in line with your financial goals and avoid taking on additional debt during this process.
If you are finding it difficult to manage your debt after a divorce, contact a financial advisor or a credit counselor. These professionals can help you create a debt repayment strategy, negotiate with creditors and rebuild your financial stability. Many nonprofits also offer free or low-cost credit counseling services to help you get through this challenging time.
A woman reviews her financial plan after a divorce.
Getting out of debt after a divorce can seem daunting, but it can be achievable with the right approach. By understanding how debt is shared, closing joint accounts, and using effective strategies like budgeting and debt consolidation, you can take control of your finances and work toward a brighter future. Rebuilding your financial stability takes time and persistence, but each step you take brings you closer to a debt-free life.
AND financial advisor can help you manage post-divorce debt by creating a budget, prioritizing payments, and developing a repayment strategy. Finding a financial advisor doesn’t have to be difficult. SmartAsset’s free tool connects you with up to three trusted financial advisors serving your area, and you can have a free introductory conversation with your advisors to decide which one is right for you. If you’re ready to find an advisor who can help you reach your financial goals, get started now.
If you want to consistently increase your savings, think about it setting up automatic transmissions from your checking account to your savings account. This approach could help you make saving a routine part of your financial life.
