Written by Canterbury Law Group

When Is a Bankruptcy Claim Contingent, Unliquidated, or Disputed?

The bankruptcy procedure requires you to categorize your debts or “claims” as contingent, unliquidated, or disputed. You’ll need to be familiar with these phrases in order to properly identify and categorize your debts on the various bankruptcy forms.

In a bankruptcy, You Must List All Debts or “Claims”

You describe your financial condition to the court, trustee, and creditors on your bankruptcy filings. Your financial information will be disclosed, along with your monthly budget, real estate and personal property holdings, debts or “claims” you owe, income, and recent real estate transactions.

When listing claims in your documentation, you must include the name, address, and amount owed to each creditor. Find out how to fill out bankruptcy forms.

Not Every Bankruptcy Debt Is Conditional, Unliquidated, or Contestable

Because the label is only necessary if it is unclear whether you owe the loan, the majority of debts won’t require a contingent, unliquidated, or contested label. There will almost always be no doubt that you owe the money. You won’t need to describe the claim as contingent, unliquidated, or contested if you don’t have a defense to use to avoid paying the debt.

Consider the scenario when you have a car loan that is past due. The claim would then be for the remaining sum. Other common responsibilities, like credit card debt, would follow the same rules.

Types of Creditor Claims in Bankruptcy: Secured, Unsecured & Priority explains additional claim classifications that you should be aware of.

When a Contingent, Unliquidated, or Disputed Debt Will Arise

Sometimes it’s difficult to determine how much money you owe a creditor. Each of the labels—contingent, unliquidated, and disputed—identifies a specific problem that must be fixed before the claim may be paid.

Maybe how much you owe will rely on what someone else does, or maybe it won’t. Alternatively, you and the creditor may differ on the amount you owe.

If there is an issue, you should note it when filing the claim on your bankruptcy papers under the relevant heading of contingent, unliquidated, or contested claim (the form provides checkboxes for these designations).

A contingent claim is what?

Payment of the claim is subject to a future occurrence that may or may not take place. For example, if you cosigned a secured loan (like a mortgage or auto loan), you aren’t liable for paying it until the other cosigner defaults. Your responsibility as a cosigner depends on the default.

An Unliquidated Debt Is What?

There are times when you owe money but are unsure of how much. Although the precise amount of the debt hasn’t been established, it might exist. Let’s take the example of a lawsuit you filed against someone for injuries you had in a car accident. Your attorney has accepted the case on a contingency basis; if you win, the attorney will receive a third of the recovery; if you lose, the attorney will receive nothing. The debt owed to the attorney is unpaid. The amount of the attorney’s fee won’t be known until the case is settled or won at trial.

A Disputed Debt Is What?

You will tick this box if there is a discrepancy between the amount you owe and what you owe, if anything at all. Consider a scenario in which the IRS has an involuntary tax lien on your property and claims that you owe them $10,000. On the other hand, you think you just owe $500. You should state that the claim is disputed and include the total amount of the lien rather than the amount you believe you owe (you can clarify how much you believe you owe in the notes).

In Bankruptcy, You Must List All Claims

For a variety of reasons, it’s typical for someone to desire to exclude a claim from the bankruptcy petition. You cannot succeed. All claims, including those you believe you owe and those that others think you owe, must be listed.

It’s ideal for you to do that. Even if it would typically be considered a dischargeable debt, if you don’t list a claim, it might not be eliminated or “discharged” in your situation.

Claims Payment in Bankruptcy

Following the payment of creditors, the following will take place:

Creditors will be notified by the bankruptcy trustee assigned to the case that it is a “asset case.”
In order to get a portion of the available funds, a creditor must submit a proof of claim form by a specific deadline.
The claims will be examined by the trustee, who will then pay them in accordance with bankruptcy law’s priority payment system.
But keep in mind that every circumstance is different. Consult with an experienced bankruptcy lawyer if you are unclear about what will happen to the claims in your bankruptcy case.

Written by Canterbury Law Group

When Is it a Bad Idea to File Bankruptcy Without an Attorney?

Almost often, hiring legal counsel to represent you in bankruptcy is a wise decision. Here are two scenarios where legal counsel is always necessary.

You’ve Got a Difficult Chapter 7 Bankruptcy

You’ll probably want a lawyer if you operate a small business, make more money than the average resident of your state, have a sizable quantity of assets, priority debts, nondischargeable debts, or creditors who can sue you for fraud. This is why.

A Chapter 7 case cannot be automatically dismissed by the filer. The bankruptcy court may reject your case or liquidate assets you believed you could keep if you make a mistake. A bankruptcy case could potentially be brought against you to decide whether or not a debt should be dismissed. If you lose, the debt will still need to be paid after filing for bankruptcy.

What Are Nondischargable Debts and Priority Debts?

A great tool for many people who are drowning in debt to get back on their feet is bankruptcy. However, it might not completely discharge your debt. In addition to being non-dischargeable, many “priority” debts also have the advantage of being paid off first if funds are available to pay creditors.

Child support, spousal support, or another domestic support duty, fines, penalties, and restitution imposed as punishment for breaking the law, some taxes, and impaired driving obligations are among the top debts you’ll still be accountable for after filing for bankruptcy.

You’ll still be liable for the following debts:

Retirement plan loans can be utilized to pay off debts that were deemed non-dischargeable in a prior bankruptcy as well as non-dischargeable tax debt (for example, if you used your credit card to pay a tax bill).
Unless you can demonstrate that completing your payments would put you in difficulty, a student loan won’t be forgiven either. The majority of people, however, fall short of the requirement. The lawsuit that is required to establish the case may also be expensive to file and defend.
Additionally, any creditor may seek the court to identify a debt that shouldn’t be dismissed in your case by filing a nondischargeability complaint.
The creditor will have to demonstrate one of several scenarios in order to prevail.
You lied about your income on a credit application or wrote a bad check, for example, to commit fraud.
Less than 90 days before you filed for bankruptcy, you charged a luxury item.
You harmed or destroyed someone else’s property on purpose.
You stole money or embezzled money.
In your bankruptcy petition, you omitted a list of all your creditors.
It’s usually not a smart idea to represent yourself if you think you might have nondischargeable debts or that a creditor would sue you.
You must submit a Chapter 13 bankruptcy petition.

Chapter 13 bankruptcy filings are preferable than Chapter 7 filings for a variety of reasons. If you want to keep your home, you might wish to apply for Chapter 13 bankruptcy to pay off mortgage arrears. Alternatively, you might choose to pay off your second mortgage, “cram down” or reduce a car loan, or repay a debt over time that won’t be discharged in bankruptcy, such back taxes or support arrears.

Even if your main reason for filing for Chapter 13 is that your income is too high to qualify under Chapter 7, most Chapter 13 cases are too complicated for an individual to file on their own.

Why Filing a Chapter 13 Case Without a Bankruptcy Attorney Is Too Difficult

You must prepare a proposed Chapter 13 repayment plan outlining how you would pay creditors over a period of three to five years in addition to filling out the bankruptcy paperwork.

Without the pricey software that most attorneys use, it is difficult to develop a plan due to the numerous bankruptcy requirements you must follow. Additionally, particular measures like paying off a car debt in full or stripping your second mortgage will necessitate submitting additional bankruptcy motions and paperwork with the court.

The vast majority of Chapter 13 cases filed without counsel are dismissed by the court due to the complexity involved. Therefore, it is a good idea to hire an experienced attorney if you intend to file a Chapter 13 bankruptcy.

Written by Canterbury Law Group

Married Debt

Whether you are liable for your spouse’s debts depends on whether you live in a community property or equitable distribution state.

Whether you and your spouse are responsible for paying each other’s debts will depend primarily on where you live. If your state follows “common law” property rules, spouses are only liable for their own debts, with a few exceptions. For instance, both spouses must pay debts for family necessities like food, shelter, or tuition for the kids, although how states treat joint and separate debts varies slightly, so you’ll want to check your state laws.

However, if you live in one of a few states with “community property” rules, both you and your spouse will owe most debts incurred by either one of you during the marriage.

Keep reading to learn more about:

  • when you owe your spouse’s debts, and
  • how community property laws will affect you and your spouse in bankruptcy.

If you plan to file for bankruptcy in California or another community property state, you’ll want to know about the “limited community property discharge” that arises when only one spouse files for bankruptcy. Although all community property will be safe from creditor collection, the nonfiling spouse’s separate property will remain at risk.

Community Property States

The states that follow community property rules are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. (In Alaska, spouses can sign an agreement making their assets community property, but few people choose to do this.)

When Are You Responsible for Your Spouse’s Debt?

In community property states, most debts incurred by either spouse during the marriage are owed by the “community” (the couple), even if only one spouse signed the paperwork for a debt. The key here is during the marriage. So if you incur a debt, such as a credit card balance, while you’re single and then get married, it won’t automatically become a joint debt. However, an exception can occur when a spouse signs on to an account as a joint account holder after getting married. Some states, like Texas, have a more nuanced way of analyzing who owes what debts by evaluating who incurred the debt, for what purpose, and when.

After a legal separation or divorce, only the spouse who incurred the debt owes it unless the debt was incurred for family necessities, to maintain jointly owned assets (for example, to fix a leaking roof), or if the spouses keep a joint account.

If you’re considering wiping out debt in bankruptcy with a debt discharge, start by learning how bankruptcy works and what to avoid before filing for bankruptcy.

How Are Income and Property Shared Between Spouses?

In community property states, couples share income, as well. All income earned by either spouse during marriage and property bought with that income is community property, owned equally by husband and wife. Gifts and inheritances received by one spouse and separate property owned before marriage that remains separate are the respective property of one spouse alone. Comingling a gift or inheritance, such as by adding it to a joint bank account, could erase the protection. All income or property acquired after a divorce or permanent separation is also separate.

What Property Can Be Taken to Pay Debts?

In a community property state, creditors of one spouse can go after the assets and income of the married couple to make good on joint debts, and remember, most debts incurred during marriage are joint debts.

You’ll find out more about when you’re responsible for your spouse’s business debt here.

Creditors can go after joint assets in a community property state no matter whose name is on the asset’s title document. For example, a business owner’s name might not be on the title to her spouse’s boat. Still, in most community property states, that won’t stop a creditor from suing in court to take the boat to pay off the business owner’s debts assuming the boat was purchased with community funds and not separate funds.

Community property collection rules also apply to a spouse’s separate debt, such as one spouse’s child support obligation from a prior relationship, or a debt in one spouse’s name only where the spouse hid the marriage. In that case, a creditor can go after only that spouse’s half of the community property to repay the debt.

Do You Owe Your Spouse’s Student Loans?

With one exception (see below), the community property rules apply to student loan debt the same way they apply to other debts acquired during the marriage. Both spouses are responsible 100% for a student loan taken out during the marriage even though only one spouse signed for it. When the parties divorce, each spouse will be awarded 50% of the debt in the property settlement.

California presents an exception to the rules applied in other community property states. According to California law, student loans aren’t community debts, and a judge doesn’t have to split this kind of debt 50/50.

Recognizing that a student loan can benefit both spouses, California takes a more equitable approach than other states. In assigning each spouse a percentage of the outstanding student loan, a judge will consider factors like:

  •  the effect of the course of study on the community
  •  whether the other spouse also went to school, and
  •  the course of study’s effect on the spouse’s ability to support the community.

How to Remove a Spouse’s Liability

Couples in community property states can sign an agreement with each other to have their debts and income treated separately. Signing a pre- or postnuptial agreement like this can make sense for a couple before one spouse goes into business. But if you’re already in business, signing an agreement now won’t protect your spouse from liability for business debts that you already owe, only from liability for future business debts.

Keep in mind that this agreement will be between you and your spouse. It likely won’t affect whether a creditor can pursue you for debt, only your ability to pursue your spouse’s personal assets for payment. Check with your family law lawyer or bankruptcy lawyer for clarification.

You can also sign an agreement with a particular store, lender, or supplier, stating that the creditor will look solely to your separate property for repayment of any debt, essentially removing your spouse’s liability for any obligation or debt from the contract—if you can get the other party to agree.

How Does Bankruptcy Work in Marriage?

If only one spouse files for Chapter 7 bankruptcy in a community property state, creditors can collect community debts against the nonfiling spouse. However, the creditor can’t forcibly take community assets to pay community debt discharged in the filing spouse’s bankruptcy. The creditor can only collect against the nonfiling spouse’s separate property.

This protection is known as a “limited community property discharge.” (11 USC § 524(a)(3).) Also, if you’re considering divorce, talk with your lawyer about the effect the divorce will have on your limited community discharge. You could likely lose its protection. Learn more about filing for bankruptcy without your spouse.

Source

https://www.nolo.com/legal-encyclopedia/debt-marriage-owe-spouse-debts-29572.html

Written by Canterbury Law Group

Common Misconceptions about Divorce in Arizona Divorce & Bankruptcy: Which Comes First?

We all have our own ideas about divorce. When it comes to the legal aspects of divorce, most people have significant misunderstandings. The legal process to divorce in Arizona is straightforward, but cases that go before a judge can become really complicated. If you are considering a divorce, it’s very important to realistically understand the legal process and consequences. Here is a list of common misconceptions about divorce most Arizonians have:

Does Filing a Court Petition Equal a Divorce?

When you file for a divorce in a court, you are required to file a petition. Some people believe this petition to be equal to a legal divorce. It is not. You are legally divorced when a judge says so and issues a ruling which recognizes the formal Date of Separation. From that day on, your civil status will be officially divorced and single, but not a day before. This date is very important because your income and property ownership (that you retain after the proceedings) only become non-marital property after this date is set by the court.

Can Child Custody be Arranged According to a Prenup?

This is an absolutely inaccurate idea. Prenups can set provisions for things like asset division in a divorce. However, child custody is solely up to a family court to decide. Child custody is largely a matter of public policy that ensures the well-being of a child. That requires judicial assessment of a child’s current living situation. Therefore, having provisions for child custody is highly improper in a prenup agreement. It could possibly render the whole agreement void. To make sure your prenup agreement has no chance of being voided by a court, consult with a divorce attorney in Scottsdale.

Can A Spouse be Ordered to Pay My Attorney’s Fees?

In Arizona, the laws allow for a divorce court to order one spouse to pay the legal fees of the other in whole or part. However, this is very much subject to a judge’s independent review. The aim of these laws is to eliminate any income disparity between the spouses from hindering access to similar legal representation (going to court on “a level playing field” so to speak). However, the judge will see how “reasonable” both parties are. In other words, your spouse will be ordered to pay your legal fees if only the request is evaluated as reasonable and that your positions are in fact reasonable as presented in court.

Is Alimony is Forever in Arizona?

Courts in Arizona typically set alimony for a specific period of time, such as until a child comes of age. The purpose of alimony is to provisionally support a spouse in need. But alimony is not financial life support. If the receiving spouse dies, remarries or cohabits with another, then alimony can be terminated.   Generally speaking, the longer the duration of the underlying marriage, the longer the potential duration of payout on spousal maintenance.

Creditors will Only Go After the Spouse for Debts He or She Agrees to Pay Off

Arizona is a “community property” state. That means that any debts incurred during a marriage become the presumptive responsibility of both spouses. The actual person who signed the loan agreement may not always matter. This status applies even after a divorce. Your spouse could agree to pay off a credit card loan or the home equity line of credit in the divorce agreement, but you won’t be completely off the hook. If the spouse fails to pay, the third party creditors could come after you. Any agreement in a divorce is between you and the spouse, not the creditor.

Filing Together: A Joint Petition

A bankruptcy case starts when an individual, a married couple, or a business files official bankruptcy paperwork to the court. A married couple filing together will submit a “joint petition” containing the financial information of both spouses in one set of documents.

Divorcing couples often file together because it can be more efficient. For example, filing a joint petition comes with the following benefits:

the bankruptcy will wipe out (discharge) the qualifying debt of both spouses, thereby reducing the issues to be decided in divorce court, and it costs less to file bankruptcy together as opposed to apart.

Married couples are not obligated to file together, however. If one spouse needs bankruptcy protection immediately, an individual filing might make sense. Or each spouse might find it easier to qualify for bankruptcy after the divorce due to a mutual drop in income. But when it’s feasible, many couples find that filing together streamlines the divorce process.

Bankruptcy and Divorce Costs

Bankruptcy filing fees are the same for joint and individual filings. So filing a joint bankruptcy with your spouse before a divorce can save you a lot of legal fees. Also, if you decide to hire a bankruptcy attorney, your attorney fees will likely be much lower for a joint bankruptcy than if each of you filed separately. However, you should let your bankruptcy attorney know about your upcoming divorce as there may be a conflict of interest for him or her to represent you both.

Filing for bankruptcy before a divorce can also simplify the issues regarding debt and property division and lower your divorce costs as a result.

Chapter 7  vs. Chapter 13 Bankruptcy

Chapter 7 bankruptcy is a liquidation bankruptcy designed to get rid of your unsecured debts such as credit card debt and medical bills. In Chapter 7 bankruptcy, you usually receive a discharge after only a few months. So it can be completed quickly before a divorce.

By contrast, a Chapter 13 bankruptcy lasts three to five years because you have to pay back some or all of your debts through a repayment plan. So if you were looking to file a Chapter 13 bankruptcy, it might be a better idea to file individually after the divorce because it takes a long time to complete.

Property Division

Wiping out your debts jointly through bankruptcy will simplify the property division process in a divorce. However, before filing a joint bankruptcy, you must make sure that your state allows you enough exemptions to protect all property you own between you and your spouse. Certain states allow you to double the exemption amounts if you file jointly. So if you own a lot of property, it may be a better idea to file a joint bankruptcy if you can double your exemptions.

If you can’t double your exemptions and you have more property than you can exempt in a joint bankruptcy, it may be more advantageous to file individually after the property has been divided in the divorce. Also, keep in mind that if you file bankruptcy during an ongoing divorce the automatic stay will put a hold on the property division process until the bankruptcy is completed.

Discharging Marital Debt

Litigating which debts should be assigned to each spouse in a divorce can be a costly and time-consuming process. Further, ordering one spouse to pay a certain debt in a divorce decree does not change the other spouse’s obligations toward that creditor.

For example, let’s say your ex-husband was ordered in the divorce to pay a joint credit card you had together. If he doesn’t pay it or files bankruptcy, then you are still on the hook for the debt, and the creditor can come after you to collect it. If you end up paying the debt, you have a right to be reimbursed by your ex-husband because he violated the divorce decree. This holds true even if he filed bankruptcy because he can discharge his obligation to pay the creditor but he cannot discharge his obligations to you under the divorce decree.

However, trying to collect from your ex will usually mean spending more money to pursue him in court. As a result, it may be in both spouses’ best interest to file bankruptcy and wipe out their combined debts before a divorce.

Income Qualification for Chapter 7 Bankruptcy

If you intend to file a Chapter 7, the decision to file before or after a divorce can come down to income if you maintain a single household. If you wish to file jointly, you must include your combined income in the bankruptcy. If your joint income is too high and you don’t pass the Chapter 7 means test, you might not be able to qualify for a Chapter 7.

This can happen even if each spouse’s income individually is low enough to qualify on his or her own. This is because Chapter 7 income limits are based on household size and the limit for a household of two is not twice that of a single person household (it’s usually only slightly higher). In that case, it may be necessary to wait until each spouse has a separate household after the divorce to file bankruptcy.

Written by Canterbury Law Group

Managing Marital Property: Do’s and Don’ts

Property division can become challenging for divorcing couples. However, this need not be a challenge.  And If you and the soon-to-be-ex cannot come to good terms on your own, a court will have to do it for you. Under Arizona’s community property law, debts and assets accumulated during a marriage belong to both parties 50/50 in the absence of a prenuptial or postnuptial agreement that says otherwise.  Arizonian family courts emphasize fairness when dividing up a property. Unlike in some states, the property may not be divided equally 50/50, but equitably in the eyes of the judge assigned to your case.  This can sometimes mean 55/45 or 60/40 or 40/60—every case is unique.

No matter what the facts, you will have to hire a talented divorce attorney in Scottsdale, Phoenix or your local area in the state. Absent years of litigation experience, you likely won’t be able to capably represent your interests in court without a deep knowledge of divorce and property laws in the state. If you are undergoing a process of dividing property in a divorce, here are some important items you should be aware of:

Determine if the Property Belongs to the Community or the Separate Category

There is a very clear distinction between community and separate property under Arizona law. Separate property is assets a spouse owned before marriage, inherited solely during the marriage, was gifted solely during the marriage, or purchased alone during the marriage with sole and separate finances. A prenuptial or postnuptial contract may also designate that certain items are to be treated as separate property.  Absent these facts, the law presumes all property and all debt, acquired or originated during the marriage, is community property.

Courts in Arizona only have jurisdiction over community property, not either spouse’s sole and separate property. Each party will have to provide evidence for separate property claims in the form of financial documents. It is possible that property that was originally separate later becomes community property during the marriage. For example, a house purchased by one spouse before marriage may become community property following the marriage if both spouses names are later placed on the recorded deed.

The reason that each is different is that the distinction between community and separate property during the marriage can be blurry. Some spouses may have unknowingly turned separate assets into community property by the “commingling” process, where two assets are combined. A bank account owned by one spouse before marriage becomes marital property if the other spouse makes deposits to it later with community income. Sometimes assets are partially community and partially separate, such as houses and retirement accounts. A business that one spouse operated but later received contributions from the other spouse after marriage can fall into this category.   A seasoned lawyer can walk you through these issues, and advance them in a court of law.

Set Values for Property

Regardless of whether community or separate property, all assets and debts must be assigned a monetary value before equitable division. The two spouses can do this themselves, or a court can do it in case the parties cannot agree on values. Typically appraisals are used to set values of real assets, like houses, antiques, or vehicles. The toughest asset to value can sometimes be retirement accounts.  You may have to hire a financial professional like an actuary to ascertain the value of a retirement account and the growth in value of such retirement assets since the original marriage date.

The Process of Dividing Property

You can see the first section above that determining whether a property is community or separate can be complicated. Ideally, both parties come to an agreement out of court. But this rarely happens when multiple assets are in question and the stakes involve hundreds of thousands of dollars or more.

Courts may divide up property in multiple ways. In the case of property that is partially separate, the court may offer a spouse the option of buying out the remaining portion from the other. In some cases, it may be recommended to mutually sell the assets and divide the proceeds. Some property, like family homes, can be co-owned even following a divorce if children are living there or visiting each year.

Arizona courts typically divide property approximately equally among the divorcing partners. There are only a handful of exceptions to the rule. For example, if one spouse is known to have squandered money through irresponsible activities like gambling or drug use, the court may rule in favor of the other. In the case of property under massive debt, the court may rule against the spouse responsible for the debt.  At the end of the day, you will need the guidance and stewardship of experienced legal counsel to navigate these issues for you.

The following information will assist you in comprehending who owns what in terms of marital property.

Common Law Property and Marital Property States

The majority of states adhere to common law property. Consequently, what does it mean to reside in a common law property state, and who owns what following a divorce? The term “common law” is simply a term used to determine marital property ownership (property acquired during marriage). Under the common law system, property acquired by one member of a married couple is solely owned by that individual.

Obviously, if the title or deed to a piece of property is placed in the names of both spouses, then the property belongs to both partners. If the names of both spouses appear on the title, each spouse owns a one-half interest.

Distribution of property upon death or divorce: When one spouse dies, their separate property is distributed according to their will or through probate (in the absence of a will). The distribution of marital property depends on how ownership is shared between the spouses. If they hold property in “joint tenancy with the right of survivorship” or “tenancy by the entirety,” the surviving spouse inherits the property. This right is independent of the provisions of the spouse’s will.

However, if the property was owned as “tenancy in common,” then the deceased spouse’s will may direct the property to someone other than the surviving spouse. Some property does not have a title or deed. In this instance, the owner is typically the person who paid for or received the property as a gift.

In the event of a divorce or legal separation, the court will decide how the couple’s property will be divided. Obviously, the couple can enter into a premarital agreement detailing the division of marital assets upon divorce.

States with Marital and Community Property

Louisiana, Arizona, California, Texas, Washington, Idaho, Nevada, New Mexico, and Wisconsin are the states with community property. In states with community property, all assets acquired during the marriage are regarded as “community property.”

In states with community property, both spouses own the marital property equally (50/50). This marital property consists of earnings, all property acquired with those earnings, and all marital debts. Community property commences at the time of marriage and terminates when a couple physically separates with the intent to no longer be married. Therefore, any earnings or debts accruing after this date will be considered separate property.

Any assets acquired prior to the marriage are regarded as separate property and belong solely to their original owner. A spouse may transfer the title of any separate property to the other spouse (gift) or to the community property (community property) (making a spouse an account holder on bank account). Couples can also commingle their separate property with their community property, for instance by adding funds from before the marriage to the funds that constitute the community property.

Spouses may not transfer, modify, or eliminate a whole piece of community property without the consent of the other spouse, but they may manage their own portion. However, the entire piece includes the interest of the other spouse. In other words, that spouse’s share of the property cannot be alienated.

Separate property consists of

  • prior to the marriage, only one spouse owned the marital home.
  • Gifts made to only one spouse prior to or during the marriage
  • inherited property by only one spouse
  • Community property consists of
  • Earnings of either spouse during the marriage
  • Items purchased with money earned by either spouse during the marriage
  • Unidentifiable separate property that has become entangled with common property.

Distribution of property upon death or divorce:

When one spouse dies, his or her half of the community property is transferred to the surviving spouse. Their separate property may be bequeathed to whomever they choose in accordance with their will or through probate in the absence of a will. Numerous states with community property provide an interest known as “community property with the right of survivorship.”

Under this doctrine, if a couple holds title or deed to a piece of property, typically a home, then upon the death of one spouse, the title automatically transfers to the surviving spouse without the need for court proceedings.

In the event of a divorce or legal separation, all community property is divided equally (50/50). The separate property of each spouse is distributed to the spouse who owns it, rather than being divided equally.

Sometimes, economic circumstances necessitate awarding certain assets entirely to one spouse, but each spouse still receives 50 percent of the total economic value of all community property. This is most prevalent in married households. Due to the impracticality of dividing a home in half, courts frequently award one spouse the home and the other spouse other assets with a value equal to half the value of the home.

Before the marriage, the couple may enter into an agreement outlining the division of marital property upon divorce.

Exceptions to the rule of equal division:

  • Prior to or during a pending divorce, one spouse misappropriates the community property.
  • One partner carries educational debts. This is the same as debt incurred separately. The spouse retains their GSL loans upon divorce.
  • One spouse incurred tort liability NOT as a result of activity performed for the benefit of the community of marriage.
  • Personal injury awards are considered community property during the marriage, but are awarded to the injured spouse upon divorce.
  • “Negative community” refers to a situation in which the community’s liabilities and debts exceed the assets available to cover them. Here, the relative ability of the spouses to pay the debt is taken into account. The objective here is to safeguard creditors.

Managing Marital Property: What You Should Do

Do consider entering into a prenuptial or premarital agreement prior to marriage. Such agreements make clear what will happen to your property upon your death or divorce. With one, you can prevent undesirable arrangements in how your property is divided in a divorce.

Do maintain accurate and complete books and records to establish the separate nature of property you wish to keep independent from the marital estate. Property you may want to keep separate can include things you had before marriage. It can also include gifts or inheritance you receive during the marriage.

Do continue to keep all separate property separate throughout the marriage, if you’re concerned about keeping it in your family upon your death or divorce. You should also do this with other things that you would also like to keep as a personal asset. Generally, this means you shouldn’t “commingle” property you owned prior to marriage with property you and your spouse acquired during the marriage. In cases of “commingling,” it may become difficult or even impossible to legally determine if it’s separate or marital property.

Do be aware that the increase in value of nonmarital property may be considered marital, so that each spouse is entitled to a share of the increased value of a possession upon divorce or the owner’s death. This is especially true if the increase in value is considered “active” rather than “passive.” (Such increases in value are officially referred to as “appreciation.”) Passive appreciation is, for example, the increase in value of a bank account as a result of interest earned. Passive appreciation also occurs with an increase in property value that results from standard inflation. Active appreciation, on the other hand, occurs as a result of some form of effort, such as repainting rental property, home improvement projects, or actively managing a stock portfolio.

Do use only your non-marital property to purchase other property that you want to be considered separate property. In other words, a boat that you pay for with money you had before marriage and kept in a separate account during marriage may be considered separate or non-marital property. But if your spouse pays for part of it, or even helps maintain it, the boat could lose the status of non-marital property.

Do keep proceeds acquired from any personal injury case during marriage separate, if you want to prevent them from becoming you and your spouse’s marital property. The money you get from a personal injury lawsuit is yours alone, except for any portion that reimburses you for your lost income or compensates your spouse for the loss of your services or companionship.

Managing Marital Property: What You Should Not Do

Don’t use separate funds to pay off a marital debt, or those funds could lose their non-marital character.

Don’t make deposits of income earned during the marriage into non-marital accounts. Income earned during marriage is usually considered marital property. Depositing that income into non-marital accounts can result in “commingling.” When that happens, the non-marital account is no longer considered separate property.

Don’t open a joint bank account with non-marital funds, even if you intend to keep track of which portion is separate. It’s much more prudent to maintain separate accounts if you wish to keep non-marital assets separate.

Don’t assume that just because you owned property prior to marriage, no portion of it will be deemed marital property. For example, if the home you owned before marriage increases in value during the marriage because of you and your spouse’s efforts to maintain and improve it, your spouse may be entitled to a portion of that increase in value.

Don’t assume that a business you owned prior to marriage remains entirely a non-marital asset after marriage. If your business or professional practice increases in value throughout the marriage due in part to your spouse’s contributions, your spouse may be entitled to a share of the increase in value upon divorce or your death. Such contributions can be obvious, such as in bookkeeping or entertaining clients. But they can also be more subtle, such as in taking care of the home and children so that you can focus on running the business.

What is Whose? Obtain Assistance with Your Marital Property Issues

Dividing marital property upon divorce or the demise of a spouse is never an easy subject to broach. Despite the fact that the specifics of property division depend on the state in which you reside, it can be quite confusing. However, you are not required to figure out the law on your own. Consider contacting an experienced divorce attorney in your area to discuss your options.

Written by Canterbury Law Group

Judgment of Divorce

Married couples always start off with the best intentions and try to make things work during a marriage. Unfortunately, not all marriages are meant to be. When it comes to divorce, it’s also great if a couple can resolve any issues they have informally. But if you and your soon-to-be ex can’t come to an agreement on your own, you might have to go to court to determine who gets what, from the kids to the coffee table.

Here is a quick overview of what you can expect in family court and the final judgment of divorce.

What is a Final Judgment in Divorce Proceedings?

The final judgment in a divorce proceeding is the final ruling that ends the marriage between a married couple. These judgments are rendered by the judge or jury. Once the court reaches this decision, the divorce is granted and finalized. In order to get a final judgment in a divorce, a married couple must go through the family court process.

Family Court and Final Judgment: The Basics

The vast majority of divorce cases reach some sort of settlement, whether through informal negotiation between the spouses (and their attorneys) or through more structured proceedings such as mediation or collaborative law.

But, in some divorce cases, no full settlement can be reached. This is usually because the spouses are too far apart in some or all of their respective wishes. They may not agree on a equitable solution for issues such as child custody, child support, and property division.

In these situations, the divorce will be handled in civil or “family” court, at the county/district branch of state court where the divorce petition was filed. A single judge usually presides over the case and issues a final judgment of divorce, although one or both spouses may have the right to request a jury trial.

The Court Process: Evidence and Arguments

In family court, attorneys for each spouse present evidence and arguments related to the divorce on issues like child custody and visitation, child and spousal support, and property division. Evidence in a divorce trial can come in the form of:

  • Testimony from the spouses;
  • Witness testimony — including a guardian ad litem, a neutral third party who advocates for and represents the child(ren) in court, and expert witnesses (financial analysts, property valuation experts, etc.); and
  • Documents — including records related to marital property and finances.

As each side presents its own evidence and arguments, the other side has an opportunity to question witnesses and challenge evidence through “cross-examination” — challenging the witness’s story, testing their credibility, disputing documents, and otherwise attempting to discredit or discount witnesses and evidence.

The Court Process: Final Judgment of Divorce

After hearing and examining all evidence, the judge (or jury) will issue a final ruling resolving the divorce and all surrounding issues. Once the judge reaches a decision, they grant the divorce and enter a judgment finalizing the divorce and all related issues.

This judgment dictates a number of things about the now-divorced couple’s rights and obligations, including:

  • Division of the couple’s marital property, debts, and resolution of other financial matters;
  • Child custody, living arrangements, and a visitation schedule; and
  • Child support and spousal support (alimony): who pays, who receives, how much, when, etc.

Once a judgment is entered, either or both spouses can appeal a trial court judge’s decision to a higher (“appellate” or “appeals”) court, although it is unusual for an appeals court to overturn a judge or jury’s decision in a divorce case.

Written by Canterbury Law Group

What Is Equitable Distribution And Separate Property In Divorce

Family courts divide property in one of two ways: equitable distribution or community property. Most states divide marital property according to what’s fair, or equitable, for both parties during a divorce. This isn’t the same as equal distribution, however, as the goal of equitable distribution is to consider the needs of each party and the facts of the case.

The equitable distribution of marital assets is determined on a case-by-case basis. It is subject to negotiation between the two parties and the discretion of the judge. If you’re getting divorced in a common law property state (where equitable distribution is recognized), you’ll want to understand how property division will be determined.

This article addresses the two ways in which assets are divided between a couple during their divorce.

Community Property vs. Equitable Distribution: The Basics

In the nine community property states, which include California and Texas, marital property (generally, all property acquired between the date of the marriage and the date of separation) is generally divided fairly equally. This is done regardless of who contributed more to the marriage (whether in regard to money, housekeeping, etc.), who has more separate property, or whether one of the spouses is largely to blame for the divorce.

 

Generally, anything purchased with money earned by either spouse during the marriage is considered community property. Community property is subject to a roughly 50/50 split in a divorce. However, separate property may be established through a written contract. Examples of such contracts are prenuptial agreements or postnuptial agreements, sometimes called antenuptial agreements.

In equitable division property states, courts take a much more delicate approach to property division. Instead of automatically dividing marital property down the middle, these states take a step back and consider what would be the fairest to both parties. This includes consideration of separate property as well as marital property, and the needs and means of each spouse.

For example, consider if one spouse gave up their career in order to stay home and raise children. They now have a difficult time earning a living after the divorce. In this instance, the court may award that party a larger cut of the marital property. Conversely, if one spouse was abusive or otherwise at fault for the failure of the marriage (even in a “no-fault” divorce), the court may award them a smaller percentage of the marital property.

Determining What’s Equitable: Factors Considered

Like community property states, in equitable distribution states, the divorcing couple has an opportunity to reach an agreement on their own (subject to court approval) before the courts intervene. This may take place in a collaborative environment or through the parties’ attorneys. If the parties are unable to reach an agreement about the division of marital property, the courts will use their discretion (within the parameters of state marital property law) in order to reach a resolution.

When courts are tasked with determining the division of assets, they’ll generally consider the following factors under equitable distribution laws:

  • Duration of the marriage;
  • Which spouse has primary custody of minor children;
  • The financial needs and liabilities of each spouse, present and future (for instance, one party may need to invest in a college degree in order to earn a decent wage);
  • The financial well-being and earning power of each spouse, present and future;
  • Amount contributed by each spouse to the combined marital property;
  • Pensions earned by either spouse;
  • Non-monetary contributions to the family (such as child-rearing, unpaid work on the home, etc.);
  • Marital debt accumulated during the duration of the marriage (such as credit card debt);
  • Age, health, and special needs of each spouse;
  • Child support (and/or spousal support) obligations of either spouse for previous relationships;
  • Total fair market value of separate property (again, this isn’t subject to division, but does factor into the overall determination); and
  • Marital misconduct by each spouse (such as gambling debts, extramarital affairs, or instances of domestic violence).

Note that premarital property is not included in equitable distribution. This is because personal property acquired before the marriage is not considered part of the marital estate. Only assets acquired during the marriage are considered part of the marital estate and are subject to equitable distribution.

Individuals often decide to get married after falling in love and realizing they have similar values and life goals. But, romantic ideals aside, marriage is at its core a merger of two entities into a single unit, with shared assets and liabilities. And just as a business merger results in the commingling of assets, so too does marriage (to a degree).

But the question of who owns what typically is addressed only when a married couple decides to call it quits and go their separate ways. Marital property is that which is subject to division upon divorce, but what is separate property in a divorce?

Marital Property vs. Separate Property: The Basics

In order to define separate property in the context of a marriage, we also need to cover the meaning of marital property. Most assets (and debts) acquired during the marriage are considered marital property and thus subject to division in divorce. The way in which marital property is divided depends upon the laws of your state, with a handful of states using the “community property” approach (generally, a 50/50 split).

 

All other property is considered separate property, which means it belongs to just one of the parties in a marriage. When a couple gets divorced, separate property is not subject to division.

 

Assets Considered Separate Property

Unlike marital property, separate property (sometimes called “individual property”) belongs to just one individual before, during, and after the marriage. This mainly consists of that which was acquired before the couple gets married, with a few notable exceptions. Debt also follows these rules; someone who enters a marriage with a heavy debt load typically will be responsible for that debt after the marriage ends.

State laws determine what’s considered separate property, but they’re fairly consistent with one another. Generally, the following is considered separate property:

  • Property owned by one spouse prior to the marriage;
  • Gifts or inheritances received by one spouse prior to or during the marriage;
  • Property acquired by one spouse (in that individual’s name only) during the marriage and not used by the other spouse or for the benefit of the marriage (unless it’s a community property state);
  • Property/debts designated as separate in a legally enforceable contract, such as a prenuptial agreement;
  • Personal injury awards, minus any compensation for lost wages (unless it’s a community property state); and
  • Any property obtained by one party using their separate property assets (such as inheritance funds) with the clear intention of maintaining the acquired property as separate.

Separate property that’s been so commingled with marital property that it’s virtually impossible to identify will be considered marital property (and subject to division) in a divorce. For instance, if marital property (shared income) is used to pay off a car originally purchased by one spouse before the marriage, the car (or a portion of its value) will be considered marital property.

Separate Property: Community Property vs. Common Law States

It’s important to understand how community property states and common law property states differ in how separate property is distinguished. Common law property states, for the most part, automatically define that which is registered in one spouse’s name only as separate property. This isn’t the case in community property states (such as California), where an express, written agreement is required for such a determination.

Additionally, common law property states will take into consideration each spouse’s separate property when determining how to equitably distribute marital property during a divorce. Since community property states split marital property in half, they don’t consider each party’s separate property.

Written by Canterbury Law Group

What Is Equitable Distribution?

Family courts divide property in one of two ways: equitable distribution or community property. Most states divide marital property according to what’s fair, or equitable, for both parties during a divorce. This isn’t the same as equal distribution, however, as the goal of equitable distribution is to consider the needs of each party and the facts of the case.

 

The equitable distribution of marital assets is determined on a case-by-case basis. It is subject to negotiation between the two parties and the discretion of the judge. If you’re getting divorced in a common law property state (where equitable distribution is recognized), you’ll want to understand how property division will be determined.

 

This article addresses the two ways in which assets are divided between a couple during their divorce.

 

Community Property vs. Equitable Distribution: The Basics

In the nine community property states, which include California and Texas, marital property (generally, all property acquired between the date of the marriage and the date of separation) is generally divided fairly equally. This is done regardless of who contributed more to the marriage (whether in regard to money, housekeeping, etc.), who has more separate property, or whether one of the spouses is largely to blame for the divorce.

 

Generally, anything purchased with money earned by either spouse during the marriage is considered community property. Community property is subject to a roughly 50/50 split in a divorce. However, separate property may be established through a written contract. Examples of such contracts are prenuptial agreements or postnuptial agreements, sometimes called antenuptial agreements.

 

In equitable division property states, courts take a much more delicate approach to property division. Instead of automatically dividing marital property down the middle, these states take a step back and consider what would be the fairest to both parties. This includes consideration of separate property as well as marital property, and the needs and means of each spouse.

 

For example, consider if one spouse gave up their career in order to stay home and raise children. They now have a difficult time earning a living after the divorce. In this instance, the court may award that party a larger cut of the marital property. Conversely, if one spouse was abusive or otherwise at fault for the failure of the marriage (even in a “no-fault” divorce), the court may award them a smaller percentage of the marital property.

 

Determining What’s Equitable: Factors Considered

Like community property states, in equitable distribution states, the divorcing couple has an opportunity to reach an agreement on their own (subject to court approval) before the courts intervene. This may take place in a collaborative environment or through the parties’ attorneys. If the parties are unable to reach an agreement about the division of marital property, the courts will use their discretion (within the parameters of state marital property law) in order to reach a resolution.

When courts are tasked with determining the division of assets, they’ll generally consider the following factors under equitable distribution laws:

 

  • Duration of the marriage;
  • Which spouse has primary custody of minor children;
  • The financial needs and liabilities of each spouse, present and future (for instance, one party may need to invest in a college degree in order to earn a decent wage);
  • The financial well-being and earning power of each spouse, present and future;
  • Amount contributed by each spouse to the combined marital property;
  • Pensions earned by either spouse;
  • Non-monetary contributions to the family (such as child-rearing, unpaid work on the home, etc.);
  • Marital debt accumulated during the duration of the marriage (such as credit card debt);
  • Age, health, and special needs of each spouse;
  • Child support (and/or spousal support) obligations of either spouse for previous relationships;
  • Total fair market value of separate property (again, this isn’t subject to division, but does factor into the overall determination); and
  • Marital misconduct by each spouse (such as gambling debts, extramarital affairs, or instances of domestic violence).

Note that premarital property is not included in equitable distribution. This is because personal property acquired before the marriage is not considered part of the marital estate. Only assets acquired during the marriage are considered part of the marital estate and are subject to equitable distribution.

Written by Canterbury Law Group

Does Divorce Impact Social Security Benefits?

Credit and Divorce

You’ll want to pay attention to how divorce and remarriage affect your Social Security, just as you would with marriage. For example, a name change must be recorded to the Social Security Administration (SSA) in order for your earnings to be accurately reported, and remarriage affects survivor benefits.

Essentially, if you have been married for at least 10 years, you will likely continue to get Social Security benefits. If your marriage lasted fewer than ten years, you would not be eligible for your ex-benefits. spouse’s Remarriage and other variables can affect your benefits.

During a divorce, it is not overly complicated, but you must understand your rights and take care of these matters immediately.

How long must a couple be married before receiving benefits?

To be eligible for spousal benefits, you must have been married for at least 10 years.

How much Social Security does a divorced spouse receive?

This is crucial information for your divorce financial planning. To comprehend your spouse’s or ex-retirement spouse’s funds, you must obtain their Social Security benefits statement. This is particularly significant if you lack your own earnings or employment history.

When you reach the full retirement age, you will get full or unreduced benefits as well as fifty percent of your retirement savings account. Typically, if you have your own benefits, you will receive them first. If your spouse receives a bigger benefit than you do, you will also receive funds from their record.

The current full retirement age is 66, but it will shortly increase to 67. You can apply for Social Security payments at the age of 62, but the amount you get will be decreased. You may be eligible for delayed retirement credits if you or your spouse prolong your retirement age. These raise your monthly benefit amount.

Can You Continue Receiving Social Security Benefits After Divorce?

You can only get Social Security benefits after a divorce if:

  • You were wed for a decade.
  • You have not married again*
  • Your ex-spouse is qualified for Social Security and disability benefits.
  • Your personal retirement benefits are lower than those of your ex-spouse.
  • You are age 66 or older
  • You have been divorced for a minimum of two years.
  • Generally, remarriage will nullify your former spouse’s benefits.

How Are Social Security Benefits Divided Upon Divorce?

Social Security can be split in a variety of ways. Still, it is common for each spouse to get fifty percent of the retirement account. You may be subject to Social Security regulations, or you may be eligible for a greater payment or additional benefits. Divorcees must consult with an attorney to guarantee that each party receives what is due.

A delayed retirement can affect the timing and amount of benefits received. Overall, delaying retirement is preferable to retiring early, so your benefits will not be lowered.

Can You Collect Social Security If Your Ex-Spouse Has Died?

Yes, you will receive the full amount of their retirement benefit if your ex-spouse dies. At age 62 or beyond, you will begin receiving Social Security. Delaying your Social Security payments until age 65 or 67 ensures you receive the entire amount (retiring before age 67 can result in a reduction of 0 to 15% in benefits till age 67).

How Divorce Affects Benefits for Survivors

If your divorced spouse dies, you are eligible for widow/widower payments if your marriage lasted at least 10 years. However, you will not be required to meet the length-of-marriage criteria if you are caring for your deceased ex-minor spouse’s or disabled child. Benefits paid to a 60-year-old or older surviving divorced spouse do not influence the benefit rates of other survivors receiving benefits.

Keep in mind that the SSA will not notify your ex-relatives spouse’s if you apply for survivor benefits. In addition, there is no limit on the number of individuals who may claim for benefits from a single Social Security account.

How Remarriage Affects Benefits for Survivors

In general, if you remarry before the age of 60, you are ineligible for survivors payments until the second marriage ends by death, divorce, or annulment. You can continue to claim benefits on your former spouse’s record if you remarry after age 60 (50 if disabled).

At age 66 or older, you are eligible to receive retirement benefits based on your new or current spouse’s record if it is greater. Your remarriage would not affect the amount of child support given to your children.

Name Modification on Your Social Security Card

If you change your name, you must inform both the Social Security Administration and your employer. This will ensure that your earnings are reported and documented accurately by your company.

You can obtain a new Social Security card bearing your new name. You must produce a copy of your birth certificate, adoption decree, or other appropriate documentation to confirm your date of birth. To establish your identity, you’ll need a valid U.S. driver’s license, state identification card, or passport.

Are You Afraid of Divorce, Remarriage, and Social Security? Consult a Lawyer

Social Security-related information is available at SSA.gov. A divorce can effect many aspects of one’s life, even after death. It is essential to comprehend the legal ramifications of a divorce, from retirement benefits to name changes on Social Security cards.

Put your mind at ease by allowing an expert divorce attorney in your state to assist you in making the right decisions regarding divorce, remarriage, and Social Security.

Written by Canterbury Law Group

Credit and Divorce

Credit and Divorce

If you have just gone through a divorce or are planning one, you may want to examine credit and divorce concerns attentively to prevent the predicament described above. In addition, understanding the various types of credit accounts acquired during a marriage can provide light on the potential advantages and disadvantages of each.

Does Divorce Affect Credit Scores? Your credit score may decline.

Divorce does not influence your credit score by itself. Unless you take the necessary safeguards, the divorce process, which sometimes involves joint credit accounts, may negatively impact your credit.

The divorce order defines who is liable for accounts opened during the marriage. This judgment does not, however, bind the lenders. This means that you may still be liable for an account bearing your name.

Types of Credit Accounts and Financial Obligation

There are two different sorts of credit accounts: individual and joint. You can also allow approved others to use your account when applying for credit.

Personal Accounts

The creditor takes your income, assets, and credit history into consideration. Regardless of your marital status, you are solely responsible for paying off the debt in your individual account. The account will appear on your credit report, as well as that of any “approved” users.

Nonetheless, if you reside in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin), you and your spouse may be responsible for debts incurred during the marriage, and the individual debts of one spouse may be reflected on the credit report of the other.

Advantages/Disadvantages

If you are not employed outside the home, work part-time, or have a low-paying job, having an individual account could be detrimental. Because it may be difficult to provide a solid financial picture without your spouse’s salary.

Alternatively, if you start an account in your own name and are responsible, no one else’s actions (or nonpayment) can negatively impact your credit rating.

Shared Accounts

Considerations for a joint account include the income, financial assets, and credit history of both account holders. In a joint account, you and your spouse are jointly accountable for paying debts, regardless of who pays the bills. A creditor who reports the credit history of a joint account must include both parties’ names (if the account was opened after June 1, 1977).

Advantages/Disadvantages

A creditor accepting a loan or credit card may consider the combined financial resources of two applicants as evidence of their creditworthiness.

However, because two people jointly applied for the credit, both are liable for the debt. This is true even if a divorce ruling assigns each spouse distinct debt liabilities. On jointly-held accounts, ex-spouses who run up expenses and don’t pay them can harm their ex-partners’ credit histories.

Account titled “Users”

If you create a personal account, you can grant access to another individual. If you list your spouse as an authorized user, a creditor who reports your credit history to a credit bureau must also include your spouse’s name (if the account was opened after June 1, 1977). A creditor is also permitted to report the credit history of any other authorized user.

Advantages/Disadvantages

Frequently, user accounts are created for convenience. Students and housewives, who may not qualify for credit on their own, benefit from these loans. These individuals may use the account, but they are not contractually obligated to pay the bill.

What Happens to Your Credit If You Divorce?

If you are contemplating divorce or separation, pay close attention to the status of your credit accounts and the relationship between credit and divorce. If you keep joint accounts during this time, it is imperative that you make regular payments to protect your credit rating. As long as a joint account has an outstanding amount, you and your spouse are accountable for it.

Will a divorce save assets from creditors?

As noted previously, a judge’s divorce judgment does not apply to creditors. This means that creditors may pursue you for any missed payments or unpaid credit card balances. Additionally, they will submit your credit history to a credit bureau.

Should Debt and Credit Cards Be Paid Off Prior to Divorce?

Yes! If at all possible, it is preferable to pay off or decrease as much of your joint debt as possible prior to or as part of the divorce process. If that is not practicable, stop making new purchases with shared credit cards.

Preventing an Ex-Spouse From Ruining Their Credit During or After a Divorce

Divorce by itself can be quite hard. However, it is essential to consider the financial ramifications, especially in terms of credit scores. The following recommendations can assist you in maintaining good credit as you go in life.

Early closure of joint accounts

You might want to close any joint accounts or accounts where your ex-spouse was an authorized user. You might also ask the creditor to convert these accounts to individual accounts.

A creditor cannot automatically liquidate a joint account due to a change in marital status, but may do so at the request of one of the divorcing spouses. However, creditors are not required to convert joint accounts into individual accounts.

Instead, they may force you to reapply for credit individually and, based on your new application, grant or deny credit. To remove a spouse from an obligation on a mortgage, vehicle loan, or home equity loan, a lender will usually need refinancing.

2. Obtain Your Credit Score Through a Credit Reporting Agency

There is no better time to obtain a free annual credit report than when you are going through a divorce or have concerns about an ex-debt spouse’s repayment. Determine your debts, what has been reported, and whether your ex-spouse is behind on payments for joint accounts.

If you reside in a community property state, you must be aware of all of your ex-obligations spouse’s accrued during the marriage, even if your name was never on the loan or credit application. Any debt created during the marriage is regarded as jointly incurred by both parties.

3. Separate and Transfer Credit Card Obligation

Instead of simply announcing that one spouse will be responsible for paying off the credit card debt, actually divide the debt on shared credit cards and transfer it to the responsible spouse. Then, cancel the joint cards without delay.

4. Include a clause on indemnification in your divorce agreement

Consider inserting an indemnification language in your divorce agreement if just one spouse is to be accountable for a jointly-owned debt. This section specifies which spouse is responsible for the debt and makes it abundantly apparent that the other spouse is not liable.

You can sue your spouse if they refuse to pay a debt stated under their name in the indemnification agreement.

Obtain Expert Legal Assistance With Your Credit and Divorce Concerns

Your credit score is an essential component of your financial well-being. If you’re considering divorce, you’ll need to know who will be responsible for the majority of the debt after the marriage and how this could affect your credit history. However, you are not required to answer these questions on your own. A local divorce attorney will be able to alleviate your anxiety.

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