Addressing debt and divorce together

by | Oct 13, 2020 | Divorce

A divorce inherently brings about the need for spouses to discuss how they will divide a great number of things. From retirement accounts to time with their kids and more, many splits must be made.

Shared debts must also be split in a divorce, unless they can be paid off prior to the couple finalizing their divorce.

Joint credit card accounts after a divorce

Some people may think that they can allow a joint credit account to remain active after a divorce if their divorce decree assigns responsibility to one spouse only. However, U.S. News and World Report explains that employing this approach exposes the spouse supposedly free from the debt responsibility to potential liability down the road.

A creditor may always consider anyone named on a debt account as liable for the debt. Therefore, if the spouse ordered to make payments on a credit card debt fails to do so, the creditor may attempt to collect payment from the other spouse. Any negative reports to credit bureaus related to late or missed payments may also be made against both spouses.

Joint mortgages after a divorce

The Mortgage Loan indicates that home loan lenders adopt the same strategy as do their credit card counterparts. When one spouse keeps a family home but does not remain current on the mortgage, the other spouse may end up being pursued for repayment. Any foreclosure actions may include both spouses as well.

These realities make it important to pay off joint debt prior to a divorce or to ensure that any remaining debt is transferred into accounts in one person’s name only.