How to Handle Joint Debts & Mortgages During Divorce

Here’s the deal: debts aren’t just split down the middle in Ohio. The courts try to divide things fairly, which means you need to understand what debts you and your spouse are responsible for and how to handle them in the smartest way possible. Whether it’s credit cards, your mortgage, or medical bills, there are options to keep things fair and manageable.

Dividing Debts When Splitting Up

When we talk about joint or shared debts in a divorce, that covers basically any financial obligation you and your spouse took on together during your marriage. This includes credit cards, mortgages, home equity loans, and medical bills.

Here are the most common types of debt you’ll need to deal with:

• Credit Cards: Even if your spouse spent all the money on a joint credit card, you are on the hook for paying it off. Ohio courts treat these debts as marital, and they’ll look at things like your income and what the money was spent on when deciding how to split it.
• Mortgages: If you both signed the mortgage, you’re both responsible for paying it until it’s either paid off or refinanced. This is one of the biggest debts couples deal with in a divorce, so how it’s handled is a major factor in property division.
• Home Equity Loans: These loans are tied to your house’s value. If you got one during the marriage, it’s considered a joint debt that’ll need to be divided when you split.
• Medical Debts: Even if only one of you had the medical bills, if they were incurred during the marriage, they’re usually seen as joint debts that both parties need to cover.

Handling joint debts the right way is key to protecting your financial future. While your marriage is ending, being smart and practical about dividing debt is crucial. The last thing you want is unexpected bills or damaged credit. Knowing what you’re facing early can ensure a fair split and avoid future financial stress.

Ohio’s Approach to Debt Division

Like your marital assets, debts are meant to be divided based on what’s fair in Ohio, also known as equitable distribution. The court looks at each spouse’s ability to pay, who took on the debt, and whether both parties benefited from it.

Here’s how some debts are usually handled:

• Credit Cards: Courts usually divide credit card debt based on who used it and what it was used for. If one spouse racked up personal expenses, they might be responsible for a bigger chunk of the balance.
• Mortgages & Home Equity Loans: What happens to your mortgage depends on what you decide with the marital home. If you sell the house, the mortgage gets paid off, and any leftover equity is divided. If one spouse keeps the house, they’ll likely need to refinance the mortgage in their name.
• Medical Debt: Medical bills are treated much like credit card debt—the court will consider who benefited from the expenses and divide them accordingly.

The goal is to make the debt division as fair as possible, considering each spouse’s situation.

What to Do About Your Mortgage When Divorcing?

Dealing with mortgages during a divorce is a very common issue, but things can get tricky. While several options can help you manage the situation without too much hassle, choosing the one that best fits your financial situation and future is important.

Here’s a closer look at what you can do:

Sell the House

Selling the marital home is often the most straightforward and cleanest solution. By selling the house, you can pay off the remaining mortgage and split any remaining profits between you and your spouse.

This option is ideal if neither of you wants to stay in the house or if it’s too expensive for one person to maintain on their own. It gives both of you a fresh start and removes the responsibility of the mortgage altogether. However, it’s essential to factor in costs like fees, closing costs, and any repairs or upgrades you may need before selling.

Refinance

If one of you wants to keep the house, refinancing the mortgage into a single name is a good option. This removes the other spouse from the loan and makes the person keeping the house responsible for the mortgage.

The challenge here is that the refinancing spouse must qualify based on their income, credit score, and financial situation. This can be problematic, especially if your household income relies on both spouses. But if you qualify, refinancing allows you to stay in the home and start fresh without your ex-spouse being tied to the mortgage.

Buy Out Your Spouse’s Share

If there’s equity in the home, one spouse can buy out the other’s share. For example, if your home is worth $300,000 and you owe $200,000, the remaining $100,000 in equity would be split.

The spouse keeping the home would likely need to refinance the mortgage or come up with the funds to buy out the other spouse’s share. This option is appealing if one of you has the financial means to keep the house and wants to stay. Keep in mind, though, that you’ll need to have enough cash or qualify for a larger loan to cover the buyout.

Home Equity Loan or HELOC

If refinancing isn’t possible due to limited equity in the home, a home equity loan or line of credit (HELOC) can provide the funds to pay off your ex’s share. These loans allow you to tap into the home’s equity, giving you the cash you need without selling the house.

It’s important to note that this option adds another layer of debt, so you’ll need to consider whether taking on more debt is financially wise for your situation. Additionally, lenders will still require you to qualify based on your financial status.

The Bottom Line

Each option has pros and cons, and what works best for you depends on your financial situation, goals, and whether you want to keep the house or move on. It’s important to carefully weigh your options and choose the path that minimizes financial stress and sets you up for a stable future.

Whether you sell the house, split the profits, or work out a buyout, the goal is to make a clean financial break and avoid any lingering ties to joint debts like a mortgage. Always consult with a financial advisor or attorney to make sure you’re making the best decision for your situation.

How to Resolve Joint Debts Fairly

Dividing debt during a divorce is not just about splitting things down the middle. It’s about finding a fair solution that works for both of you. Here are some practical strategies to help make the process smoother:

Mediation

Mediation can be a great option if you and your spouse are struggling to agree on how to handle joint debts. A mediator provides a neutral setting where you both can work out an agreement without going to court. They can help you negotiate a fair division of your debts, ensuring both parties walk away with a manageable solution. It’s often less stressful (and less expensive) than battling it out in court.

Debt Consolidation

For some couples, consolidating joint debts before finalizing the divorce is a smart move. Combining multiple debts into one loan or payment simplifies repayment and could even lead to lower interest rates. It’s a way to get a handle on what you owe and create a clear path for paying it off, making things more straightforward as you transition to separate finances.

Work with Creditors

One step that’s often overlooked is contacting your creditors. Let them know about the divorce and ask about options for separating joint accounts. This helps you avoid any surprises down the road like your ex running up a balance you’re still responsible for. It’s also a good way to protect your credit score when your finances are already in flux.

Consult Your Lawyer

No two divorces are the same, and getting professional advice is key to protecting your financial interests. An experienced family lawyer can help you understand your debt division rights and ensure you don’t end up with more than your fair share. They’ll guide you through the process and make sure everything is handled correctly, giving you peace of mind.

Ultimately, resolving joint debts fairly requires communication and a clear plan. By using these strategies, you can move forward with confidence.

FAQs: Marital Debts During Divorce

What happens to joint bank accounts during a divorce?

Closing joint bank accounts during a divorce is a good idea to prevent either spouse from withdrawing funds or accumulating new debt. Splitting the funds in the account fairly and opening individual accounts will help keep things clean and avoid future disputes.

Can I be forced to sell the marital home to pay off debts?

If you and your spouse can’t agree on how to handle joint debts or the mortgage, the court may order the sale of the marital home to pay off shared debts. This helps ensure that neither party is left with an unmanageable financial burden.

How are student loans handled during a divorce?

Student loans are typically considered separate debts in a divorce, especially if incurred before the marriage. However, if both spouses benefited from the education (such as higher household income due to the degree), a portion of the loan may be treated as marital debt, depending on the circumstances. Courts will assess the situation and decide whether the loans should be shared or remain the responsibility of the person who took them out.

How can I protect my credit during a divorce?

To protect your credit, close joint accounts as soon as possible and ensure all bills are paid on time. Setting up individual accounts and monitoring your credit report regularly is also a good idea.