In today’s economy, divorces can weigh heavily on the family finances. Typically, one of the most important and potentially complex issues is how to the distribution of debt.
Let’s start with a hypothetical situation regarding community property. You may cynically reply, “What community property? We are upside down on our home, what savings we had is gone and all our credit cards are maxed out.”
Feel a bit of kismet with that remark? If so, then one strategy in your divorce will not only be about dividing assets, but how you divide debt. If you want to save resources, one of the first things you’ll want to do is get professional assistance – not just from your attorney, but also from an accountant.
You and your spouse or partner will need to organize your finances and familiarize yourself with the “Income and Expense Declaration Form.” Put some serious time into filling out this document as completely as possible.
Next, come up with a plan with your professionals so that you can make wise and informed decisions. For instance, some debts will have tax advantages while others will not; some debts are shared, some are not. Certain debts, such as school loans, will go to the party that originally took out the loan.
Get as much information as possible from your hired professionals – benefit from their education and training to illuminate the path. Try to anticipate, with your attorney, how a judge might divide your debt so you are prepared and can properly establish your own personal financial status separately from your spouse.
Finally, discuss with your attorney and accountant the importance/possibility of closing all joint accounts. You do not want to be responsible for increased debt that your spouse might rack up on credit cards while you are still in the process of getting your divorce. There is a good chance that debts incurred during the process of the divorce can be considered as both parties responsibility. Separating your finances early on will provide you with more control over your own financial future.