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You're divorcing your spouse, not your lenders

During your marriage, you may have incurred some debts with your spouse. Perhaps you have a mortgage, a car loan or two, and credit cards, along with other financial obligations. While things are good, you both work together to make the payments on your debts and enjoy the fruits of those labors.

That could change dramatically if your marriage ends. As you work to untangle your lives, you are splitting not just assets, but your debts as well. So what does it mean to "divide" your debts in a divorce?

Your creditors don't care about your personal life

If your divorce settlement is like many others here in New Jersey, you more than likely agreed to take on some of the marital debts while your soon-to-be former spouse took on others. You each agree to pay off the debts you chose, but what if that doesn't happen?

What happens if your former spouse fails to make the payments for some reason? Well, the creditor will look to you for payment since it is a joint debt. You can tell the lender that your ex agreed to pay the debt in the divorce, but that won't matter. Your personal life is of no consequence to a creditor to whom you owe money.

So, how do I protect myself?

At this point, you may be asking yourself why you would go through the trouble of dividing your debts if the lender could still come back on you for payment if your former spouse fails to meet those financial obligations he or she agreed to take. Fortunately, it may be possible to take some steps to protect yourself.

You could request that the lender remove your name from the debt. In many cases, this does not happen just from asking. You may only be able to have your name removed from the debt if your ex-spouse refinances the loan on his or her own.

If that doesn't happen, your name may remain on the debt. In that case, monitor your former spouse's progress with paying off the loan. You can request that the lender provide you with updates and any statements regarding the debt since your name is still on it. This way, you can keep track so that you aren't surprised if an issue arises.

Further options if it's not a contentious divorce

If you divorce is amicable, you may be able to address your joint debts prior to filing for divorce. You could sell assets that neither of you want to keep, and pay them off that way. Each of you could take out your own personal loan to pay off your joint debts. In fact, you and your spouse may come up with other options that would work best for the two of you.

The point is to make sure that the individual who does not agree to take a particular debt will not end up responsible for it later. As you outline how to divide your debts in your settlement agreement, you may also incorporate penalties for each person if he or she fails to follow through on those commitments. This could provide incentive to adhere to the agreement.

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