A divorce most often corresponds to a string of unforeseen expenses. Among them, lawyers’ fees, bailiff’s fees, removals …
But what happens to the loans contracted by the former couple?
Basic principles and real estate loan
In the case of a mortgage, one of the spouses is authorized to keep the property provided the loan is taken back in his own name and if he agrees to pay a balance , used to finance the contribution prior to the payment of the loan (and the price of the property if sold).
This act is then considered as a share buyback (or cash) and can be easily financed through the purchase of loan. This can be an important aid since it allows for the collection of expenses related to divorce, including the purpose of settling the share of the spouse concerned.
The divorce agreement then specifies who takes back what loan.
The compensatory allowance
In the event of imbalance or significant disparity, a compensatory allowance may be awarded to one of the former spouses.
It can be a payment of capital or a life annuity , which can be spread over several months or years (up to eight years).
It is important to know that the judge may refuse this compensatory allowance, especially if it is claimed by the spouse found guilty in the divorce case.
In exceptional cases, the benefit may also take the form of a life annuity , as when the beneficiary can no longer provide for himself.
If the beneficiary remarries or lives with someone, the payment of this benefit is not interrupted. If the payer dies, the payment continues through the estate.
In all cases, this compensatory benefit will have a direct impact on the redemption / consolidation of loans :
1) If the paying spouse wishes to get rid of the benefit by making a single payment , and for this purpose he has a new loan, his due capital will be included in his loan buyback file.
2) In the case of an annuity , the monthly expense of the annuity will be included in the overall expenses after the repurchase of the loan. As a result, the debt ratio will be significantly increased.
3) It is finally possible to integrate the amount of the benefit into a complementary cash flow , at the same rate as the repurchase of loan. This allows to settle the claim.