Surveys tell us that money issues are one of the
Surveys tell us that money issues are one of the main reasons for marriage breakup, so divorce and debt often go together. From time to time, you need to borrow money to pay for something that you do not have the chance to save for like buying a house, paying for education, buying a car. Most of you are familiar with applying for a credit card or signing for a home mortgage. It is important to understand the implications of these events when facing divorce.
When a marriage ends, assets and debts acquired by a couple during their marriage have to be divided. All assets are valued and all debts owed on the day you separated are accounted for and subtracted from your assets. Money owing on credit cards, balance of mortgage, car loans are all examples of such debts. The person who gets the asset usually (but not always) gets the responsibility for any loans against it. It is just as important to determine the amounts and ownership of your debts, as it is to have correct valuation of your assets.
Some debt is considered “good debt” like a mortgage, which comes with low interest rates and the likelihood that the property will increase in value over the long term. Other debt is “bad debt” which is used to buy things like cars, clothes, etc. that depreciate in value. Most “bad debt” shows up in credit card balances. Upon marriage breakdown when debts are listed and ownership analyzed, it is important to understand the different kinds of credit accounts opened during a marriage.
There are two types of credit accounts: individual and joint. When you apply for credit, whether a credit card or a mortgage loan, you will be asked to select one kind.
If you apply for an individual account, the creditor considers only your own income, assets and credit history. Whether you are married or single, you alone are responsible for paying off the debt on this account. This account will appear on your credit report only.
With joint accounts, the income, financial assets and credit history of both spouses are taken into consideration. No matter who handles the household bills, both spouses are responsible for seeing debts are paid. Because both spouses applied together for the credit, each is legally responsible for the entire debt
Everyone who has ever borrowed money or applied for a credit card has a credit file. Your credit file contains a history of all your financial dealing with credit grantors. It lists details regarding all your credit cards, line of credits, loans, etc. It contains infor-mation about how much you owe, whether you pay on time, credit limits, and if you have ever declared bankruptcy.
When you apply for a loan or credit card, you are usually asked for consent to allow the lender to check your credit report to see your history of paying your debts. They will use this information to determine your capability to make monthly payments. They want to ensure that if they lend you money you can pay them back. You have the right to obtain a copy of your credit report at any time.
If your debts are completely out of hand, you may consider filing for bankruptcy at some point as your only solution to dealing with your debt issues. However, you have a number of other options available to you. Bankruptcy should be the absolute last resort. You can contact your creditors and see what repayment arrangements you can make with them. It is surprising what they may agree to. This will help preserve your credit rating. You can consider a debt consolidation loan where you bank. You consolidate all your debts into one loan. The bank pays off your loans and you repay the bank. You can file a formal consumer proposal with your creditors, with the help of a trustee that may allow you to pay off a portion of your debts, extend the time you have to pay, or some combination of both. Your credit rating is affected less than in a bankruptcy.
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Tags: car, Credit Card, Credit Cards, Credit History, Credit Report, Debt, Loan, Marriage, Mortgage