When you decide to call the whole thing off, you need to diligently manage all of the existing debts from your marriage. There is an easy way and a hard way to do this. The easy way would be to communicate openly and agree on how things will get settled. The hard way, of course, is to play hardball with each other. Of course, this is a really difficult time emotionally. It may not be easy to keep emotions out of any financial discussions. Furthermore, your ex may not make that possible at all. However, you need to make sure that things get done correctly.

A Plan of Attack

During or before the divorce proceedings, you should figure out who will be responsible for which debts. You can do this any way you like. The most important thing is that everybody knows what they need to take care of. When dividing up debts, it is a good idea to make the user of the asset the responsible party. For example, suppose you have a home mortgage and an auto loan. Whoever will live in the house should take care of the home mortgage. Whoever will drive the car should take care of the auto loan.

By having the asset user make the payments, you make it so that the responsible party has an incentive to keep the debt current. If you have a nasty divorce, and you're supposed to make the payments on your spouse's automobile, it can be tempting to withhold payments and wait for the car to be repossessed. Of course, this strategy would damage your credit, though it might be rewarding emotionally.

After you decide who will pay for each of the debts, update the accounts. If you will continue to live in the house and make mortgage payments, you should be the only one on the mortgage loan. To accomplish this, you can call your lender and ask to have your ex removed from the loan. It may be necessary to refinance the loan, essentially replacing it with a brandnew loan. This takes time and money, but the closure and reduced risk for all involved more than compensates the expense. If there are monetary expenses, figure those into the total divorce settlement. Nobody has to win or lose; you just need to tidy things up.

In the same vein, assume that your ex-spouse will drive the car and take over payments for the auto loan which was in both of your names. It is very important that you get your name off the loan. Again, your spouse may need to refinance or find some other way to accomplish this, but it is worth the time, energy, and cost.

Refinancing

For mortgage loans, you will most likely have to refinance the loan. Why? If you applied jointly when they gave you the loan, they looked at both of your incomes when determining if you could make the payments. With both of you as borrowers, the mortgage lender could count on two incomes, and could go after two people in case of a default. If you just remove somebody from a loan, the risk to the lender increases. They would rather have you apply for a new loan, with new terms that reflect the new level of risk. If your single income is not enough to support the payments, they won't grant you the loan. From their perspective, your ex was responsible when you initiated the loan, and they're not going to let her off the hook unless you alone can make the payments. Now, if you remarry and have a dual income, or if your income actually is enough to support the payments, refinancing should not be a problem.