During a separation, married couples must settle the division of their property, but also of the loans contracted during their common life. How to achieve this sharing on the best conditions? Will they have to settle their loans? Will it be necessary to use a loan buy-back to lighten the burden of monthly payments for each of the spouses whose resources may have been modified by the separation? A quick overview of solutions in the event of a divorce with regard to loans.
Establish an inventory of common heritage.
Spouses in the process of divorce must first establish an exhaustive list of their common assets, active and passive.
Real estate and movable property, credits, debts, they precisely list all the elements of this heritage before communicating the list to their lawyers.
When the ex-spouses were married under the “separation of property” regime, they will also have to include in the partition the so-called undivided property (acquired jointly).
Which credits are affected by sharing?
The credits that can be shared are those that are called “household debts”. These are loans that were contracted during the marriage or credits that were used to finance the life of the household, such as the acquisition of furniture, a car, or the financing of children’s studies.
Bank overdraft, personal loan, revolving credit, earmarked loan,… all these credits are to be considered.
If the couple has obtained a mortgage to finance the purchase of a house or an apartment, the fate of this loan will depend on the decisions made as to the property. If, for example, the property is sold, the real estate loan can be repaid and the surplus distributed between the two spouses. In the event that one of the two ex-spouses retains the property, he will be solely responsible for reimbursing the maturities of the mortgage.
How to share the credits.
During a divorce by mutual consent, it is possible to agree on a distribution of credits. Two solutions are then possible: either you distribute the credits and each one takes care alone one or more credits after the separation. In the other case, a common repayment can be envisaged and then each of the two ex-spouses pays according to their income the monthly payments of the loan. In all cases, it will be imperative to indicate the methods chosen in the divorce agreement.
Another imperative: the principle of solidarity between spouses must be respected.
That is to say that when one of the two spouses contracts a credit or a debt, the other spouse is automatically united. In other words, each must repay the credits or debts contracted by the other when the one who contracted the debt can no longer assume the repayment. This principle also applies even if the divorce agreement grants this or that credit to one of the spouses. If you wish to disengage from a loan, the solution may be to repay it in full in advance.
Our advice: buying back credits can also be a good solution to reduce your debt ratio. It will be a question of regrouping all or part of the credits in only one in order to reduce the monthly payments and to improve the financial situation of the two divorced.