Divorce settlement- Better settle the joint liabilities before the division of assets
Trying to make a marriage work is the best one can do, but in situations where you know divorce is the best way to bring peace and sanity to life, it’s important to settle all the joint liabilities taken by the couple during their happier times. When it’s a legal separation like divorce, not only assets but liabilities such as loans and credit card debts hold jointly should also be settled mutually and amicably.
Friction is inevitable when while filing for divorce the couple forgets about the liabilities they own together. It is always better to settle liabilities even before you decide the division of assets as in liabilities the lender or the third party is also involved. It is in the best interest of both the parties to involve a professional financial advisor to minimize errors and future confusions and conflicts. However, there are a few things that the couple seeking divorce should immediately do on their own as an initiative towards the settlement of liabilities.
Steps towards settling the joint liabilities
In case of any existing loan, the bank or the lender party should immediately be informed and be notified about this big change happening in your life. In case both the parties decide to share the burden together, even after separation and do not default on the EMIs, the lender will not have any interference.- If both the parties have a joint account together, the cash in the account should be mutually settled through consent and the account can be closed or transferred in the name of either owner.
- Both the parties can mutually decide on to settling the liabilities like credit cards and other dues by full payment as a part of the divorce agreement as well.
- In case of a house co-owned by both the parties, according to the Indian divorce laws, either the husband has to sell the house and give wife the share or will have to give her the share amount in cash. In such cases, it is always better to plan and mutually decide in advance to speed up the divorce procedure.
- In case of investments, both wife and husband have a choice to either stop them with immediate effect or wait until their maturity and then share the benefits. The latter happens only if both mutually agree to keep sharing the burden of paying the premiums together till the investments mature.
- In cases, where one of the parties does not want to be the joint applicant for a loan, it is up to the bank to take a call based on the creditworthiness of the other applicant. Mostly, banks are reluctant to transfer a joint loan in the name of a single person. This situation must be well- thought beforehand as this may hinder the process of smooth separation.
Settlement of joint liabilities in case of divorce can be tricky. If you think simply intimating the bank about your decision of separation is enough, think again. Until you submit a written intimation to the bank, the bank can even supersede the court’s decision on loan repayment conditions. In case both the parties are not willing to share the payment burden, it is in the best interest to sell the asset and settle the dues.
Make sure that before your divorce gets finalized, the joint-demat accounts, bank lockers and other savings accounts are closed. All the holdings can be liquidated and transferred to both the individuals as per the ratio decided. In case of lockers, both the parties should be present in the bank branch and after completing the formalities can either surrender the locker or opt for single lockers.
