The protocol for the division of secured debt during a divorce depends on specific state statutes relating to securities and the division of assets. Not all debt is secured.  A secured debt is attached to collateral, such as a loan secured by a home or car loan secured by the car. If the debt is not paid, the lender can repossess the item to satisfy all or part of the outstanding balance. In a divorce situation, parties are eager to force the balance of the debt on the other party. However, as a San Diego divorce attorney can explain, the process is often much more complicated than simply assigning debt to one party over the other.

The protocol for the division of secured debt during a divorce depends on specific state statutes relating to securities and the division of assets. Not all debt is secured.  A secured debt is attached to collateral, such as a loan secured by a home or car loan secured by the car. If the debt is not paid, the lender can repossess the item to satisfy all or part of the outstanding balance. In a divorce situation, parties are eager to force the balance of the debt on the other party. However, as a San Diego divorce attorney can explain, the process is often much more complicated than simply assigning debt to one party over the other.

The difficulty with dividing secured debt is that the family court normally does not have jurisdiction over the third-part lender, nor can it generally override contractual obligations contained in the security agreement. As a specific example, a family court judge cannot remove one spouse from a home loan (mortgage) amidst divorce without approval from the lender. Lenders are particularly reluctant to remove any liable party from a secured debt agreement, especially during an acrimonious divorce proceeding.

Your San Diego divorce attorney may recommend refinancing the debt based on the financial portfolio of one spouse as opposed to both. This may not be possible in every divorce situation as parties engulfed in divorce proceedings often do not have the requisite assets and financial strength to qualify for a refinance.

Explore with your San Diego divorce attorney which option is best for your specific case.  In most situations, one party may agree to maintain payments of the secured debt until it is paid off. This may not be ideal to the other party who worries about the risk of default in the event the other spouse fails to maintain his or her half of the payments. A San Diego divorce attorney can help draft a divorce agreement that takes all these concerns into consideration.

For more information or to discuss your case, do not hesitate to contact experienced San Diego divorce attorney Lisa Zonder.