If you’re contemplating divorce, you know that one of the most difficult parts is dividing debt. Suppose your spouse agrees to pay off certain debts and they fail to repay one or more debts after the divorce is final – this can present a big problem.
Even if a spouse has specific debt obligations spelled out in the divorce decree, that doesn’t mean that the other spouse is shielded from creditors. You see, creditors don’t care about the agreements in divorce decrees. You could send a copy of your divorce decree to a creditor and they’d probably laugh and throw it in the trash.
Let’s say that you and your spouse are both on a $25,000 auto loan; by law you’re both legally responsible for paying off the auto loan, regardless of what it says in the divorce decree.
So, if your spouse losses his or her job and they can’t afford to pay the car payments, then you’re on the hook for the debt. Not only that, but the late payments will reflect on your credit as well.
Creditors Aren’t Concerned About Divorce Decrees
Creditors are not involved in people’s divorces. You can make it clear that your wife is responsible for all the credit card debt she racked up during the marriage on joint credit cards, but if she doesn’t pay up, you can be certain that the creditors will go after you for the charges.
To protect your credit during divorce, here a few simple steps that you can take:
- Determine which accounts are in your name alone, and which accounts are joint (both of your names are on them).
- If you have any joint credit card accounts (where you’re both equals), remove your spouse from the account, or if you owe money, close the account.
- If your spouse is an authorized user on any of your accounts, remove him or her from the account so they can’t access it.
- If your spouse agrees to assume a credit card debt, have that debt moved over to one of their individual accounts by using a balance transfer option.
Paying Off Other Debts ASAP
If you have any joint debt with your spouse and you can afford to, we highly recommend paying off all marital debt, even before you draw up the divorce papers. If not before you file for divorce, try to get it done before you’re officially divorced.
For example, if you have $5,000 in joint credit card debt, pay it off before the divorce is finalized. Be sure to either close the accounts, or remove each other’s names from joint accounts. You don’t want to leave any financial loose ends when the divorce is over.
If you have any cash or savings available, you’re better off tapping into that and getting rid of the debt before the divorce is final. If you sell your home in the divorce, consider using a portion of the proceeds to eliminate all marital debt.
As with all divorce-related issues, you should seek the advice of a divorce attorney and financial advisor before making any strategic decisions. You don’t want to add debt to the complexity of your divorce – try to clear the debt before you finalize the process.