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What your divorce does not do

When you end your marriage, you typically want to have nothing more to do with your former spouse. Unless, of course, you have children, and then you custody agreement and eventual parenting plan will describe your relationship with your child or children's other parent.

Financially, with the exception of child support or the rare case in Minnesota with spousal support, you want to ensure that you and your former spouse are totally separated. This is because no matter what is stated in your divorce settlement if you are jointly obligated on car loans, mortgages or credit cards, it is the loan documents or credit agreements on those accounts that control your liability.

This is why it is necessary in the case of a mortgage to pay off the remaining balance and refinance in the name of the spouse who will retain the home. This can be a challenge for many couples and this is why many couples wind up selling the home and dividing the equity, if any.

Because divorce can cause financial hardship for one or both parties, bankruptcy filings are always a risk. If you are still listed on a car loan or credit card, your spouse could stop paying, declare bankruptcy, obtain a discharge and walk away from the debt.

The lender or credit card company would likely turn to you for satisfaction of the debt, even if you no longer have the vehicle or made no charges on the credit card. You would have to pay those bills and then, at additional expense, would need to sue your former spouse for violating your divorce settlement to recover your cost of paying those bills.

This is why you need to close all joint accounts and ensure that all of your debts are accounted for in your divorce agreement.

Source: cnbc.com, "Breaking up is hard to do: Protecting assets in divorce," Kelli B. Grant, January 17, 2016

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