Pros and Cons of Paying Off Debt Prior to Divorce

Careful consideration of marital finances is necessary when crafting a fair divorce settlement. Part of this is deciding whether to pay off debt before finalizing a divorce. This decision can significantly impact the smoothness of the divorce proceedings and the equitable division of assets and liabilities. Chat with an Orlando family lawyer to have the specifics of your situation reviewed and to explore the pros and cons of paying off debt before divorce.

Benefits of Settling Debts Before Ending a Marriage

Some of the pros of paying off debts include the following.

• Simplifies asset division. Clearing joint debts can simplify the process of dividing assets and liabilities. With fewer debts to consider, the division of remaining assets can proceed more smoothly, reducing potential conflicts.
• Reduces financial entanglement. Paying off debts before divorce can minimize future financial entanglements with your ex-spouse. This can help both parties move on more cleanly and reduce the likelihood of future disputes over shared financial obligations.
• Improves credit scores. Eliminating debts can positively impact both parties’ credit scores, providing a more stable financial foundation post-divorce. Good credit scores can be crucial for securing housing, loans, and other financial needs independently.
• Emotional relief. Addressing and eliminating debts can provide emotional relief and a sense of closure. It can be one less thing to worry about during an already stressful time, allowing you to focus on other aspects of the divorce and your future.

Drawback of Paying Off Liabilities Before Divorce

While paying off debt can simplify the process and provide emotional relief, it also needs to be considered if doing so will create inequities or financial strain.

• Potential for inequity. Paying off debt before the divorce is finalized can sometimes lead to an inequitable division of assets. One party may end up paying more than their fair share, especially if the debts are paid off using joint funds or if one spouse is more financially solvent.
• Impact on negotiations. Getting rid of debt early may impact the divorce negotiations. It might remove leverage that could be used to negotiate a more favorable overall settlement, particularly if one party has taken on a larger share of the debt.
• Uncomfortable finances. Using marital funds to pay off significant amounts of debt before the divorce can place a financial strain on one or both parties. This can be particularly problematic if the divorce process is lengthy or if there are uncertainties about future financial needs.
• Financial changes. The financial circumstances of both parties can change during the divorce process. Paying off debt early may not be the best use of available resources, especially if unexpected expenses arise or if one party’s financial situation deteriorates.

Deciding whether to pay off debt before or during a divorce can significantly impact your finances moving forward. Chat with an Orlando family lawyer to determine what is best for you.

Who advised you to pay off your financial obligations before leaving a marriage? Consult with the experienced family law attorneys at Donna Hung to develop a strategy that best meets your objectives. Call 407-999-0099 or contact us online to get started.