Married couples commit to each other for better or worse and getting into debt falls into the second category. Many married couples enter into a debt management plan jointly because both parties bear responsibility in amassing the debt. If the relationship goes bad and the couple decides to separate or divorce, this will impact the debt management plan.
The effect of separation or divorce on a joint debt management plan usually means that the plan is split into 2 separate debt management plans if you can afford the minimum payments. If the debts are joint debts both parties are liable for the full balances. You may also qualify for a different solution such as an IVA which could write off up to 85% of the debt balances. Contact us today and fill out the online form for more information
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Financial issues can cause problems in a relationship
Being in debt or living on restricted finances due to debt repayment can break a couple apart. It is not unusual for splitting couples with a joint plan for debt management to request help from a debt expert. Couples who are joint homeowners typically wonder if the way property is handled following separation or divorce will affect the handling of a debt management plan.
While formal insolvency measures such as bankruptcy or an Individual Voluntary Arrangement consider equity in the home, a debt management plan does not. If the couple elects to sell the home, the proceeds can be used for any purpose desired. The money is not required to be applied to the plan. However, if a profit is made on the home sale, this creates an opportunity to end the plan early through an offer to settle debts with a lump sum payment. A separating or divorcing couple may view this as an attractive option because it provides them with a fresh financial start.
For those who do not have enough home equity or are not homeowners, this early repayment option typically does not exist
Each person is likely to face increased expenses due to living on his or her own. Therefore, the repayment established for the plan must be reduced, extending the plan term. The company handling the plan will inform creditors about the new situation or may recommend an alternative way to repay the debt more quickly.
Some couples part amicably and are willing to continue their joint plans after separation or divorce. However, experts warn against this, instead recommending the establishment of individual plans. The reason is the resentment that often develops regarding the allocation of payments, one person failing to make the required contribution, privacy, or data issues. With separate plans in place, an ex-couple avoids these issues and can focus on repaying their debts rather than arguing with each other about the plan.
Separation or divorce is never a happy situation but it is also not the end of the world
Former partners can exist happily individually, each taking care of individual debts. Once they have repaid the money due, they may have a new perspective on life and be ready to re-enter the dating world. The important thing is that they avoid accumulating any more debt.
Since a plan for debt management can continue after a separation or divorce, a couple need not stay together for relevant financial reasons. Couples who are considering splitting should contact a debt expert to get more information about the effect on their plan. This professional should be able to answer any questions and address all concerns they have.