Divorce settlement negotiations often focus on dividing up assets like the marital home, bank accounts, and retirement funds. But never overlook the importance of properly dividing up debts as well. What can you do to ensure that you manage debt arrangements in the best way possible during negotiations? Here are a few steps to take.
1. Get a Credit Report
Divorcing spouses should always check their credit reports, as it can be a wealth of information. When it comes to joint debt, this is a good way to make sure you have accounted for any and all debts in your name. In some states, you should also see a copy of your spouse's credit report if you may be liable for marital debts in their name.
2. Pay Off Joint Debts
The less you have to negotiate over, the more easily a settlement will be reached. If you and your spouse have marital debts that will become part of negotiations, the best approach is to pay some or all of them off before negotiation begins. Use joint or individual assets (such as bank accounts or liquidated items) depending on whether a debt is joint or individual.
3. Look for Red Flags
Red flags are signs that something may be amiss. You may be able to spot signs of hidden debts by carefully examining available documents. Bank records may include recurring payments that indicate hidden debt, for instance, or transactions with organizations which may be lenders. Ask questions, especially if you feel that your spouse is evasive.
4. Get Copies of Tax Returns
If you filed any tax returns jointly, both spouses are equally responsible for most tax debts. This includes known tax debt from filed returns as well as any new debt if those returns are ever audited. So get copies of all joint returns and your own individual tax returns. Confirm with the tax agency that the amounts due have been paid. Get remaining balances on payment plans. And get a second opinion on previously filed forms to prevent later audits.
5. Use Trial Discovery
Discovery is the pre-trial process of exchanging evidence and information between two civil litigants. Discovery is mandatory, so your spouse must respond to your requests unless there is a legal objection. If you request that they turn over records of all marital debt, they must do so. Failure can result in legal trouble. This provides extra assurance that you know everything.
Contact a divorce settlement lawyer for more information.