The negotiations are finally complete, whether amicable or warlike. Families, marital assets and obligations have been painfully divided. There is a breakdown of items and responsibilities with which you will each leave the courtroom. With the final word of the judge you have entered the ever-growing population of the newly single. A common misunderstanding by both ex-spouses is that the judge's word with regard to credit obligations is final.
It is not.
James Quick, a local divorce attorney explains, "over the course of a marriage debts are incurred and credit is granted based on both parties ability and promise to pay. The judge's instructions designating responsibility for each debt does not relieve either party in the eyes of the credit grantor. Both parties must consider arrangements that will protect each from the others potential irresponsibility. Each individual should be prepared to manage his/her own financial health. Ideally, all accounts should be settled by means of refinance and reorganization and the parties should open accounts individually."
Typically the largest family debt is the home mortgage, and oddly enough it may be the easiest to settle.
Consider this example:
Mary & John Hatechew have decided to go their separate ways. Although Mr. Hatechew has been awarded Pookie the Parrot (who affectionately refers to him as Master John the Irresistible), Mary gets the home, mortgage obligation and shares of Enron stock. The home is valued at $150,000...the stock is virtually worthless. There is a first mortgage with Potter Bank & Trustless for $200,000 with 20 years left to pay and a line of credit secured by the home for $25,000, which Mary was unaware, fueled John's internet casino habit. John needs to get his name off both notes so that he can protect his own credit history and purchase a trailer home of his own down by the river. Mary wants to make her monthly debts much more manageable and change stockbrokers.
Mary needs to refinance the home, pay off the first mortgage, the line of credit and possibly any other of her debt. This will relieve John of any indebtedness on the home he has surrendered. But, Mary has never had a mortgage on her own and John was credit challenged and needed Mary as his co-borrower when they bought the house.
At this point both parties need a professional mortgage planner.
There are mortgage products to fit every borrowers needs and goals and an experienced mortgage broker has access to all of them, very often at rates lower than any national retail bank can offer. Few people plan to have to go it alone when they commit to marriage and becoming newly single may present unanticipated financial situations. Partners accustomed to relying on each other now must prepare for their individual futures.
It would be wise to take the time to sit with a local mortgage professional for a free planning session and sort out all your options.
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