Illinois couples who are considering a separation or divorce should also begin the process of evaluating their debts. When couples elect to divorce in Illinois, the partners are required to divide both their debts and assets. If the matter of debt and asset distribution is left up to the court, the state’s equitable distribution guidelines will be utilized. In most cases, these rules are not conducive to the wide variety of financial situations couples may be contending with. Also, it is important to understand that the state’s equitable distribution guidelines do not mean that all debts and assets will be divided equally. Instead, they will be divided in a manner that the court deems to be fair and just based on the circumstances.

Prenuptial Agreements Often Fail to Address Marital Debt

In many cases, even if the couple had executed a prenuptial agreement that outlines the distribution of separate and marital assets, the issue of debt accumulated during the marriage is not included in the agreement. Many couples find that the best solution to amicably resolve the issue of debt accumulated during marriage is to work together to pay it off before beginning the divorce process. If this is not possible, each partner must be proactive about making sure that they do not take on more than their fair share of the total debt load.  

Consumer Debt From the Marriage

Consumer debt such as credit cards can become a particularly contentious issue in a divorce. It is important to understand that, with regard to joint accounts, the credit card company is under no obligation to recognize your divorce agreement. This means that no matter how you and your partner divide the debt, both of you may still be liable if the other defaults on their payments, just as if you were still married.

With many provisions in the Coronavirus Aid, Relief, and Economic Security (CARES) Act signed back in March expiring and the economy still suffering, Congress has started negotiations on additional legislation to relieve Americans facing financial burdens. While the Senate Republicans have the Health, Economic Assistance, Liability Protection and Schools (HEALS) Act and the House Democrats have the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act—all differing vastly in how to provide aid—there are two things that almost every politician agrees on:

• The country needs additional emergency assistance from the government to weather this storm and somehow stay afloat.

• Direct payments in the form of stimulus payments, similar to those allocated in the CARES Act, might be the quickest, most efficient way to provide citizens with immediate relief.

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Retirement accounts and pension plans are important issues in Illinois divorce proceedings. In some cases, they are the most valuable asset acquired during a marriage. Even though one spouse may hold the pension, IRA, 401(k), or another retirement fund, this account typically qualifies as marital property.

Marital property is anything acquired during the duration of the marriage, as opposed to non-marital property, which accumulated before the commencement of the union and is not a part of the marital estate. All or part of a retirement account is usually included as marital property and is subject to property division.

Retirement Savings as Marital Assets

Account terminology depends entirely on the type held by the spouse. If the account was an employer-sponsored retirement plan, it likely is a 401(k) or pension plan. Typically, the verbiage used for the division is known as a Qualified Domestic Relations Order, or QDRO (pronounced as “quad row” or “cue drow”). If, however, you or your spouse had an Individual Retirement Account (IRA), a transfer incident to divorce would be the correct terminology.

One of the biggest struggles for many divorcing couples is determining which party, if either, will get to keep the marital home and how the finances can be arranged to make it happen. When you and your spouse share a mortgage on a home, ending one party’s responsibility is not usually as simple as taking his or her name off of the note. If you are intending to keep the home, transferring the mortgage into your name alone is a process that may take months or even years, and preparation is absolutely vital.

Review the Feasibility

Before jumping in, you need to take an in-depth look at what your post-divorce financial situation will look like. If you are like most people going through a divorce, it is important to keep in mind that you will be required to support yourself—with or without some help from spousal maintenance—on a single income. You will want to make sure that you cannot only afford the mortgage payments but also all of the expenses associated with owning a home as well, including taxes, utilities, repairs, insurance, and more.

Moving Forward Alone

Once you have determined that keeping the home is, in fact, realistic, and your spouse has agreed to the decision, you will probably need to provide some sort of compensation to your spouse to offset his or her portion of the value of the home. You may choose to draw directly from the equity in the home or offer some other asset or property of value to do so. Either way, you will most likely need to take out a new mortgage on the home, listing you as the sole borrower. Your spouse will probably be strongly supportive of this idea so that he or she cannot be held liable for any possible future defaults.

When we think of divorce, many of us initially only consider the personal and romantic relationship which is coming to an end. However, divorce is not only the end of a romantic partnership, but also a financial relationship. Finances are usually merged when two people get married and move in together. Divorcing couples who cannot agree on how to split their accumulated assets will have that decision made for them by the court system.

Hiding Assets or Lying About Finances Will Only Drag Out Your Divorce

In order to make decisions about things like child support, spousal maintenance and property division, courts use each divorcing party’s self-reported financial information. For example, when a judge needs to decide how much spousal maintenance a person must pay to their ex, he or she will consider things such as each person’s income and future employability. Sometimes, in order to game the system, a spouse will lie about how much money they make or what their debts are. Doing this can significantly delay and complicate the divorce process. In order for a divorce to go smoothly, both spouses must be willing to be honest regarding their finances.