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How to Divide Debt in Divorce: Credit Cards, Mortgage, Cars and Medical Bills

Let’s face it, dividing up debt during divorce is not fun for anyone. The process of splitting liabilities like credit cards, the mortgage, car loans, and medical bills can be complicated and stressful. But the good news is, with some organization and open communication, you can get through it.

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Dividing Credit Card Debt During Divorce

When ending a marriage, dividing up debt is often complicated. Credit cards are one of the trickiest to split up. If the cards are in both of your names, you’re both responsible for the entire balance, even if one person used the card more. The fairest approach is to determine who spent what and divide the balances proportionally. Make a list of each card, its balance, and who incurred which charges. Then split the totals based on percentages. If needed, one spouse can take over and refinance a card in their own name.

READ ALSO: Refinancing Your Student Loans? Here’s What You Need to Know

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Splitting the Mortgage and House in a Divorce

When it comes to splitting up the house, the mortgage is usually one of the biggest headaches. If you’re both on the title and mortgage, you’ll need to figure out who keeps the house and takes over the payments. One option is for one spouse to buy out the other’s share of the equity.

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Deciding Who Gets the Cars and Auto Loans After Divorce

Deciding who gets which vehicles and takes on the associated auto loans can be tricky during a divorce. Here are factors to consider:

1. Who drives which vehicle?

Think about who primarily drives each vehicle and their needs. If one person has a long commute or drives extensively for their job, their vehicle use may take precedence. Be open to compromise if needed.

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2. Whose name is on the titles and loans?

If both names are on the titles and loans, you’ll need to determine if one person wants to take over the vehicle and refinance the loan in their own name. This may require adjusting other assets or the overall settlement to offset the balance. If only one person’s name is on the loan, they will typically keep that vehicle and the responsibility for payments.

3. Vehicle equity and remaining loan balances

Determine each vehicle’s private sale value to understand its equity. If a vehicle has little to no equity left, the person keeping it may need to take on little to none of the remaining loan balance. For vehicles with lots of equity, you may split the proceeds from selling it and each take a portion of the remaining loan. Or one person can take over the entire loan in exchange for keeping the equity.

4. Insurance and maintenance responsibilities

Discuss who will insure, fuel, repair and maintain each vehicle going forward. If one person is keeping a vehicle with high mileage, the other may agree to split major repair or maintenance costs for a certain time period. Spell out details clearly in your settlement to avoid confusion.

Dividing vehicles and debts in a divorce requires open communication and compromise. Consider each person’s needs and priorities, be willing to negotiate and try to find solutions that seem fair to both parties. With patience you can determine an equitable division of your auto-related assets and responsibilities.

READ ALSO:Want to Become a Mortgage Loan Officer? Here’s What You Need to Know

Handling Medical Debt When a Marriage Ends

When ending a marriage, medical debt is one issue that has to be addressed. This can include things like:

1. hospital bills from the birth of children,

2. chronic health issues or conditions requiring ongoing treatment,

3. accidents and emergencies,

4. insurance deductibles and copays.

Splitting these types of expenses will depend on several factors. If the debt was incurred during the marriage for the benefit of both spouses or children, it’s typically considered a shared liability.

However, debt in one spouse’s name only may be treated differently. Some options for dividing medical debt include:

  • Splitting the amount owed right down the middle. This straightforward approach works if you’re on reasonably good terms.
  • Having the spouse responsible for incurring the majority of the debt take on a larger portion.
  • Assigning debt to the spouse who will have primary health insurance coverage for any children after the divorce.
  • Negotiating with healthcare providers and insurance companies to reduce the total amount owed or set up an affordable payment plan.

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Creating a Fair Debt Payment Plan for Both Parties Post-Divorce

This includes credit cards, mortgages, auto loans, and any medical debt.

1. Credit Cards

Close any joint credit card accounts immediately. For existing balances, decide if you want to split the amount owed 50/50 or proportional to your incomes. If possible, the person keeping the account should refinance it in their own name only. Pay off high-interest debts first before other obligations.

2. Mortgage

If keeping the home, refinance the mortgage in one person’s name only. The other party signs a quitclaim deed releasing their right to the property. If selling, use the proceeds to pay off the balance, then split any remaining amount. Consider if one person wants to buy out the other’s share to avoid selling.

3. Auto Loans

Whoever keeps the vehicle takes over payments and refinances the loan in their name. The other party signs the title over to release their claim. If multiple vehicles, determine an equitable way to distribute them. Selling one or more vehicles to pay off the others may help simplify the situation.

4. Medical Debt

Unfortunately, medical debt incurred during the marriage becomes joint debt. You’ll need to determine how much each party can contribute to pay off the total amount owed based on your incomes and expenses. Make payment arrangements with providers to set up an affordable repayment plan.

Conclusion

So there you have it, the basics on how debt is typically divided in divorce. While the process can be complicated, the good news is there are standard approaches for splitting things up fairly.

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