Marriage is about love, trust, and finances. Whether you are in the process of getting a divorce, looking to create a prenup, or are just curious about what would happen should your marriage end, it is important to understand what happens to debt in cases of separation. Here’s how you can expect your debt to be divided upon divorce, and what you can do to protect your wealth.
How to Separate Assets Before or During Marriage
If you are preparing to get married, or are recently married, there are ways to protect your financial assets in case of divorce.
What Is a Prenup?
A prenup, short for a prenuptial agreement, is a legal document in which spouses state what their responsibilities will be, in addition to how their assets and debts will be divided, in the event of a divorce or death. While prenups are an investment (they can cost anywhere from $1,500 to $10,000 depending on the couples’ existing debts and assets) they are worth it in the event of a divorce. A prenup will enable you to specify exactly who will pay what debts at the end of a marriage. The certainty that a prenup provides is worth the price.
What Is a Postnup?
If you and your spouse decided after marriage to get a prenup, it’s called a postnup, or post-nuptial agreement. Postnups function in the same way that prenups do. Notably, it will likely be more expensive to get a postnup made as you and your spouse have probably accumulated more assets since marriage.
Legal Liability after Divorce
In simple terms, if you signed the loan, you are responsible for the loan. Even if your former spouse claims they’ll pay it off, you are not ‘off the hook.’ Creditors do not care if you are no longer married. If your spouse defaults on payments, or has late fees, they will come after you if you are listed on the loan.
The opposite is also true. If you took out a loan for your spouse during your marriage and were both paying it off, you might expect to continue to do that after divorce. However, when the debts are settled in court, if you are listed as the sole borrower, it will likely only be you that is directed to pay the loan off.
How to Protect Your Money in Case of Divorce
So, what if it’s too late? You and your spouse are on the rocks and you need to start thinking strategically about your debt and your future. The truth is, it’s never too late to get a jump-start on an equitable financial separation from your spouse. The moment you and your partner decide to separate is the moment you should take action. Preparing your finances by taking the following steps BEFORE you see a family law attorney will pave the way for an easier and simpler divorce.
Just as you are severing the emotional connection to your partner, you need to sever the financial one. Stop using joint credit cards in order to be able to identify what debt is whose. If possible, close down joint checking and savings accounts. In addition to halting the usage of joint credit cards, you need to get your name taken off the accounts. This might be time-consuming, but the idea is to create as much distance as possible between you and any debt your soon-to-be ex-spouse is creating.
Finally, pay off as much shared debt as possible before entering into formal divorce proceedings. While collaborating with your spouse in this manner may be the last thing you want to do while expecting a divorce, paying off community debt will clear up who is responsible for other debts, and make the divorce proceedings quicker and smoother.
Contact Us Today
Divorce is stressful, emotionally exhausting, and will take a lot out of you. If you and your spouse are divorcing, what you need is an experienced attorney in your corner. The Cedar Rapids divorce lawyers of Arenson Law Group, PC have decades of experience in the community helping people like you get through one of the most difficult periods of their lives. We will help you get organized, protect your assets, do our best to help you get the most time possible with your kids, and get through this divorce as smoothly as possible. Call us today at (319) 363-8199 to start making a plan for your new life and new future.