How do we find out what we owe?
You probably already know what you owe. However, if one spouse has been secretive about financial matters or if one spouse is a compulsive shopoholic, you may be unaware of how much debt has been incurred. The easiest way to find out what you owe is to get a credit report. There are three companies that provide credit reports at minimal cost: Equifax. (800) 685-1111 Experian (800) 392-1122 Trans Union (800) 916-8800 Once you have received a copy of your credit report, you must establish which accounts you are liable for, which accounts are joint accounts and which accounts are solely your spouse's responsibility. Now that you know how much you owe, it is important to freeze you accounts in order to prevent your debts from getting any worse. To do this you can call the number on the back of the credit card and ask them to freeze your account. Remember, never cut off your spouse without their knowledge. Both partners should agree on which credit cards to freeze before you call the credit card company. You can even decide on keeping one or two credit cards active for designated purposes only and make sure you decide on spending limits.
How do we decide how to pay off our debts?
You have a few choices on allocating responsibility for your debts: You can agree to pay them off now - If you have cash or property that you could sell now, this is the simplest and safest route to go. This way, there will be no entanglements as you both begin your new lives. You can agree for one spouse to be responsible for all debts and for this spouse to get more assets to compensate them - This option allows each party to know exactly what they have when they leave the marriage. If you decide to be responsible for the debts, you may choose to liquidate some of your property to pay off the debt, or you may choose to keep your property and make other arrangements to pay off the debt now or later. If you agree for your spouse to be responsible for a debt that you shared, be careful because you could become vulnerable if your spouse fails to make payments on the joint debts. Credit card companies can still hold you responsible. You can agree to share all debts equally - Although this may seem like the simplest option, it could become the most complicated. Let's say you owe $1000 on a joint credit card and the account is accruing interest each month. Let's say that you pay $60 toward the debt, but you ex can only pay $20 this month. The balance accrues more interest than it would if you had both paid $60. Now you have to calculate the difference. What if this goes on for a few months or what if the other spouse also decides to make smaller payments? As you can see, the calculations can become mind boggling. Furthermore, by having common debts, you remain entangled to your ex-spouse after the divorce and this increases the risk that one of you will take advantage of the other. The most desirable end result is to finish with a list of debts for which you are each solely responsible without the further involvement of the other spouse.
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