Divorce can bring about a sea of emotional and financial challenges, and one of the most complex aspects is dealing with debt. When you and your spouse are parting ways, untangling your financial obligations can feel overwhelming. At Justice Legal Group, serving New Mexicans since 1997, we understand the importance of addressing debt during divorce with empathy and expertise. In this blog, we’ll explore how debts are handled in a divorce settlement in New Mexico, providing guidance to help you navigate these turbulent waters and secure your financial future.
Understanding Debt in a Divorce
Debt is often an intricate part of marital finances, and divorcing couples must decide how to manage and divide these financial obligations. Here are some key aspects to consider:
Community vs. Separate Debt:
- Community Debt: Generally, debts incurred during the marriage are considered marital debt, regardless of which spouse’s name is on the account. This includes credit card balances, mortgages, car loans, and personal loans.
- Separate Debt: Debts acquired by one spouse before the marriage or after the date of separation are typically considered separate debt. However, even separate debts can be subject to division in some cases.
Community Property State:
New Mexico follows the community property system when it comes to property and debt division during divorce. This means that, in most cases, marital debts are considered community property, and both spouses share equal responsibility for them.
Debt Division Options:
During divorce, there are several ways to handle debts:
- Joint Responsibility: In some cases, both spouses may agree to share responsibility for the debts acquired during the marriage, continuing to make payments as outlined in the divorce settlement.
- Refinancing or Transferring: If possible, you may consider refinancing the debts in one spouse’s name or transferring them to the spouse who benefits from the assets tied to the debt.
- Sell Assets: Selling assets like the family home or a jointly owned vehicle can provide funds to pay off marital debts.
- Negotiation and Settlement: In some cases, spouses may negotiate and reach a settlement on how to divide debts, either equally or based on their financial circumstances.
- Court Decision: If spouses cannot agree on debt division, the court may make decisions based on equitable distribution, considering factors such as each spouse’s income, assets, and financial needs.
Creditors and Joint Accounts:
It’s important to note that creditors are not bound by divorce settlements. If your name remains on a joint account or debt, you could still be held responsible for it if your ex-spouse fails to make payments.
Protecting Your Financial Interests
Here are some steps to protect your financial interests when dealing with debt during divorce:
- Gather Financial Information: Compile a comprehensive list of all marital debts, including account statements, balances, and interest rates.
- Consult with an Attorney: Seek legal counsel to understand your rights and obligations regarding debt division in New Mexico.
- Negotiate Wisely: Work with your spouse to negotiate a fair division of debts, taking into account each party’s ability to pay.
- Refinance or Transfer: If possible, explore options to refinance or transfer debts to the spouse who can best manage them.
- Review Credit Reports: Monitor your credit reports regularly to ensure that joint accounts are being managed appropriately and that your credit is not negatively affected.
- Protect Separate Debts: If you have separate debts, ensure that they are not mistakenly included as marital debts during the divorce process.
How Justice Legal Group Can Help
At Justice Legal Group, we understand the complex financial challenges that accompany divorce, especially when dealing with debt. Our experienced family law attorneys can provide the following assistance:
- Financial Assessment: We can help you assess your financial situation, including debt obligations, to develop a clear understanding of your financial standing.
- Negotiation and Mediation: Our team can facilitate negotiations and mediations to help you and your spouse reach an agreement on debt division that works for both parties.
- Legal Representation: If necessary, we can represent your interests in court, advocating for a fair and equitable division of marital debts.
- Protection of Separate Debts: We will work to ensure that any separate debts are not improperly included in the marital debt division.
Dealing with debt during divorce is a significant and often challenging aspect of the process. At Justice Legal Group, we are dedicated to providing empathetic guidance and expert legal representation to New Mexicans facing these financial complexities. If you are navigating divorce and need assistance with debt division or any other family law matters, please contact us at 505-407-0573 or email us at info@JusticeLegalGroup.com. We are here to help you secure your financial future and make informed decisions during this life-changing transition.