When considering a divorce, most people think about protecting their children and the things they own. They want to protect their investments, their cash, their homes, vehicles and other important assets.
This approach makes sense, but there’s another thing not enough people think about in divorce: division of debts. Similar to how assets obtained during the marriage are considered marital property, so also debts accrued during the marriage are shared. It is critical to protect yourself against sharing liability for your ex-spouse’s debts.
Using Prenuptial Agreements and Postnuptial Agreements to Protect Yourself
An interesting article in creditcards.com mentions prenuptial and postnuptial agreements as a powerful tool for protecting a spouse from assuming the other spouse’s debts in divorce.
Prenups and Postnups are legal agreements, signed by both parties, that specify the details of a potential future divorce. Issues like child support, custody, spousal support, parenting plans and other issues can be agreed upon in these agreements. They are great tools for minimizing the contentious nature of a divorce and make the process faster, less expensive and potentially more equitable for both parties.
Debts can also be included in prenuptial and postnuptial agreements.
How to Make Sure Your Prenup or Postnup Will Hold Up in Court
The article brings up some important things you can do to protect yourself and make sure your agreement will hold up in court:
- Do not co-sign loans: If someone co-signs a loan, they are agreeing to the lender that they will be held liable if the primary signer fails to make payments. This agreement will likely trump a prenuptial agreement to not be responsible for a spouse’s debts.
- Explain anything that looks suspicious: If one spouse keeps most of the assets and the other keeps most of the debts, it could look inequitable and judges – as well as creditors – are like to question this. Avoid problems here by explaining the reasoning within the agreement itself.
- Be specific: Specificity lends credibility to an agreement. Label the assets and debts clearly and specifically, noting which spouse will assume which debts (and including rationale for these choices when appropriate).
- Work with attorneys: Ideally each spouse would have their own legal counsel when negotiating and crafting a prenuptial or postnuptial agreement. This helps each spouse make sound decisions, avoid critical mistakes and ensure legal efficacy.
Clearly, there is a lot involved in prenuptial and postnuptial agreements. When properly crafted, they will hold up in court and help prevent you assuming liability for your ex-spouses debts.
However, it is critical to work with an experienced, knowledgeable attorney who can walk you through the process and protect your rights.