One aspect of divorce is property division. In addition to dividing the assets, you also have to divide the debts. This can lead to some very difficult negotiations and potential arguments. Property division is often a contentious area of divorce and for good reason.
The terms of your divorce will impact you for the rest of your life. How assets and debts are handled during the property division process will play an important role in shaping your credit and your future life.
Make sure you understand how property division during divorce can impact your credit. Four facts to know are:
1. Debts must be divided
All of the marital debts have to be divided. In some cases, the property is divided first and then the debts are used to even things out a bit. Make sure that you aren't taking on more than your fair share of the debts. This might not be an equal share. Under Minnesota law, courts are required to divide all marital property equitably. This does not guarantee a 50/50 split of marital assets and debts.
2. Your credit can be affected
The division of debt can have an impact on your credit. You can't count on your ex-spouse's income as a factor in your creditworthiness. Instead, your debt-to-income ratio is based only on your income. This means that even if you had a low debt-to-income ratio before the divorce, it might be much higher now. This could be disastrous to your credit report because your debts won't necessarily go down because of the divorce.
3. Creditors don't have to follow divorce terms
Even though your divorce spells out who is responsible for which debts, the creditors who hold those debts don't have to abide by those terms. Instead, the creditors can continue to handle your account in the same way they always have. This is because you and your ex-spouse were the only parties who were involved in the divorce. Creditors can continue to take action against you and your ex-spouse until the situation is resolved.
4. You can minimize the impact to your credit
You can take steps to minimize the impact that the divorce has on your credit. One thing you can do is to get the joint accounts paid off before the divorce is final. Another thing you can do is to find out if creditors will move debts from joint accounts to individual accounts. This would protect you from having your credit ruined if you ex-wife opts not to pay the debts she is responsible to pay.