When you have a large amount of debt, it can be difficult to imagine digging out from underneath it; more so, if you’re planning for divorce. If the debt was accumulated in a marriage, it may seem even more impossible to untangle. Who pays what? How do you split credit card bills in both your names? What if one of you feels that the other is responsible for most of the debt?
These are deep, roiling waters to navigate but you do not have to go it alone. Read on to learn how divorce mediation can help you amicably dissolve a marriage saddled with debt.
First, Understand the Rules
In a community property state like California, debt incurred during a marriage is considered community property so each of you is responsible. Debt dating to before the marriage — say, school loans, credit card debt, or medical bills — or after the separation are not community property.
For joint accounts or co-signed loans, creditors do not care if you say your ex-spouse ran up most of the debt or if you agree they will pay it off and they miss payments. You will still be held responsible so it’s in your best interest to work together to separate or pay debts.
How to Unravel Shared Debt
With the help of a good divorce mediator, you can negotiate the payments of debts with your ex, while receiving actionable advice that will help you protect your future finances.
Prepare by creating an honest account of debts and assets, including documentation to back it up. Also establish evidence of your separation, which is considered the end of community property and can affect spousal support. This evidence consists of two requirements: one spouse expressing to the other their intent to divorce and that their conduct is consistent with this intent. This is crucial if you believe your spouse may continue to accumulate debts.
A qualified divorce mediator will have experience with debt separation and be able to provide potential solutions that will help you and your ex move forward. These solutions may include:
- Splitting debt from the shared credit card via balance transfers to new individual cards
- Selling assets to pay down debt
- Agreeing to accept debt responsibility for assets you will possess (i.e., a vehicle)
- Splitting assets and debts or arranging support in a way that is palatable for both parties, such as agreeing to less alimony if the paying spouse accepts responsibility for a substantial amount of community property debt
If the debt feels like more than you can handle, your mediator may make recommendations for third-party credit counseling or bankruptcy attorneys.
But What if We Can’t Afford Divorce Mediation Cost?
Paying money to a divorce mediation firm when you’re already over your head in debt may seem like a foolish move. But when you consider the alternatives, it may be the best move you can make. An attorney-led divorce can leave you in tens of thousands of dollars in debt — even if you never step foot in a courtroom. If you do end up in court, there’s no guarantee the judge will rule in your favor.
What about a DIY divorce? You can attempt to file the paperwork on your own but there will be no legally binding documentation of how you and your spouse decide to split your assets and debt. You will also lack the benefit of professional advice from an unbiased third-party who has mediated hundreds of cases, understands the laws of your state, and knows how to help both parties look far into the future to create a divorce mediation agreement that will stand up over time.
When you search for a divorce mediation firm, ask about pricing and payment plans. You may be able to budget for a single-fee package plan or establish payments that you and your spouse can manage over time such as these outlined on southbaymediation.com.