Austin Family Attorneys Examine the Role of Secured Liabilities and Joint Debt for Divorced Couples

In this article, Austin family attorneys take a comprehensive look at the role of secured debts shared by couples who are undergoing a divorce.

What Secured Liability Is

Essentially, a secured liability is a debt that has something pledged to it as collateral. If you borrow money to buy a car, the debt is secured by the car. Failure to make the payments will result in the car being repossessed and sold to offset the sum that was borrowed to make the purchase. Many debts are secured in this way, simply because it guarantees that the lender will be paid one way or another.

Connection To The Marital Estate

Normally, Austin family attorneys do not recommend separation of each debt from the property or other asset pledged as its security. If one spouse is making the payments on a motorcycle, for instance, the other spouse ought not to be able to take full possession of the vehicle without assuming the debt as well. For one to be responsible for payment on property that the other possesses is improper and gives one spouse an unfair advantage over the other. In a divorce situation, this is undesirable because the spouse who holds the debt can enforce conditions on the other spouse by refusing to make payments if those conditions are not met. For a divorce to be a clean separation between two people, the playing field should be level with neither side gaining the upper hand over the other.

Debts Incurred And Secured Jointly

Major purchases, such as vehicles, homes or the like, are usually made by the couple as a unit. In such a case, the question faced by the couple and their Austin family attorneys becomes how to divide both debt and property equably. Depending upon the circumstances under which the debt was incurred, separation may not be possible and one spouse may remain under obligation to make the payments as part of the divorce settlement, even though the asset itself must be relinquished to the other spouse.

The Lender’s Perspective

There is nothing an Austin family law firm can do to compel a lender to free someone from debts incurred, as there is nothing in the law says that the lender must forego payments due to a divorce settlement regardless of how assets are to be divided. Since lenders characteristically expect to be paid back, there is no incentive for them to do so spontaneously.

Contingent Liability

If possible, one of the spouses or the other may be able to renegotiate the terms of the debt. In a word, a refinance may be a solution to a joint liability issue. However, this depends greatly on whether the spouse is financially able to support the debt and make the payments in a timely manner. If not, and this is not unusual due to the stress that divorce causes in a couple’s financial state, then the other spouse must be prepared to take the debt over if the first spouse is forced to default. This is called contingent liability, and preparation for it may have to be taken into consideration when assets are divided so that the debt is paid with as little adverse impact as can reasonably be expected.

Contact Austin Family Attorneys

With so much riding on how a divorce is settled and a marital estate is divided, getting the right advice is a must. Contact your Austin family attorneys by calling the Attorneys at Nunis & Associates at (512) 236-9696 today.