Properties and Finances

A divorce settlement on a property settlement note is one of the trickier ways to go when it comes to equalizing a couple’s assets. The entire idea is to provide one spouse time to essentially “buy out” the property settlement note from the other spouse at a reasonable interest rate. If everything goes according to plan, then the spouse receiving the payments and interest ends up with tangible income for the duration of the note. However, there are very few actual guarantees that anyone coming to terms on a divorce settlement on a property settlement note when it comes to working out as planned.

There are many, many divorce cases that end up back in court when the ordered spouse simply stops payment on a property settlement note. In a bankruptcy case, the property settlement note agreement would in fact most likely be discharged, which can literally steal tens of thousands of dollars in payments right out from under the other spouse. Many divorce settlements on property settlement notes are simply never really that far from another round in the courtroom. While this is not only costly for both parties as the legal fees add up, it is also just one more way to stay connected and prevent the process of forward progression.

It can not be ignored that this type of agreement is not a secured agreement, and there is little recourse for the owed spouse in the event of nonpayment. Additionally, there are too many unforeseen obstacles that can change the financial outcome of an arrangement like this. Should the paying spouse become incapacitated through illness, accident, or mental illness there is no guarantee that payment will ever be made. Additionally, if the paying spouse dies before the note has been completely paid off there is little to no recourse for the receiving spouse.

While a divorce settlement on a property settlement note can be secured, this not only slows things down but it drags out the entire process enough that most couples choose to skip this step. Getting it secured requires even more money for legal fees and more time in the presence of lawyers and courtrooms for what usually consists of an agreement that is barely more stable than an oral agreement. Most couples find that a clean split is better than taking on a property settlement note during their divorce.