During a divorce, debts owed jointly by the couple must be divided between them just like assets. Each spouse should take care to ensure that responsibility for each debt is assigned, and that each spouse is protected from any additional or personal debt incurred by the other or from the other spouses failure to pay off their share of the debt. This will help protect each individual's credit score and the ability to obtain future loans.
In many cases, each spouse will be assigned the debt to specific credit cards so that cumulative debt is shared evenly. However, the parties can also agree to split the debt unevenly, or can be ordered to do so by a judge based on financial circumstances. To ensure that all debts are identified and assigned, it may be helpful to obtain a credit report which will list all debts.
How Can I Protect Myself from Future Liability?
It is important to make sure that liability is cut off so that future debts incurred by one spouse are not considered joint debts, even though they are incurred after the divorce. For example, if a joint account remains open with both names on it, any charges will be considered joint debt and the credit company will be able to go after either spouse for payment. Also, the debt and any delinquent payments, default or referral to a collection agency will appear on the credit report of both spouses. It is important, therefore, that all joint accounts be closed or that the spouse not still using the account have their name removed.
To protect each spouse further, the divorce judgment should include a deadline for the payment of any joint debts by each spouse. This can include the transfer of the debt to an individual credit account, since the other spouse will no longer be liable. The judgment should also include clauses requiring the spouse responsible for a debt to repay any losses suffered as a result of the failure to pay off the debt, such as defending against a collection agency.
There is also language which can be included in a divorce judgment which can help protect a spouse from being left without recourse if the other spouse declares bankruptcy before paying off the credit card debts.
Do I Need a Lawyer?
The laws regarding dividing debt during a divorce are very complex. An experienced family law attorney can advise you in dividing your debt and in drafting a divorce agreement that protects both spouses from future credit liability. A lawyer can also represent you in court if needed.