Do you want to keep the family house and/or car? Often when spouses resolve their divorce issues on their own, they have one party keep an asset, such as a house or car, and have the other party responsible for paying the loan thereon. For example, a wife may want to stay in the family home with the kids, and the parties decide that the husband will pay the mortgage on the family home in lieu of paying child support or spousal support. It sounds nice to keep things simple and resolve the matter with this sort of offset, BUT often this approach spells disaster if the party who is “supposed” to make the loan payments doesn’t always make the loan payments.

Consider the following:

If a secured debt is not awarded with the corresponding asset, the party responsible for paying the debt may not be motivated to pay later on, when circumstances change. For example, a former husband may lose his job and determine that paying his own rent with what little money he has left is more important than continuing to make payments on his former wife’s house or car. Some debts are secured, such as a car loan or a mortgage on a house, and some debts are unsecured, such as a credit card or a personal credit line. If payments are not made on a secured debt, the creditor may take possession of the security, such as repossess a car or foreclose on a house. In our example, the creditors holding the car loan or house mortgage may repossess the former wife’s car or foreclose on her house, and the wife’s recourse would be to make the payments herself and then try to collect from the former husband for having to make the payments that he was obligated to make. Good luck with that because the former husband lost his job and may not have assets from which to collect.

To avoid the Secured Debt Not Awarded with Asset mistake, please be sure to award secured debts with the corresponding asset. For example, rather than having the husband pay the car loan in lieu of spousal support, have the husband pay the wife spousal support and then the wife makes the loan payments on her car.

The Law Office Of Andrew J. McCall represents Family Law litigants in Contra Costa & Solano Counties, so, if you know someone who has been trying to do his/her own divorce and is having problems, have him/her contact me to discuss representation or consultation.