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Joint debt during and after your divorce

On Behalf of | Nov 11, 2020 | Divorce |

Divorcing couples must not only disentangle their combined assets when they end their relationship, but also their shared debts.

The process of negotiating who should repay which debt and outlining that in a divorce decree may be important, but so too is how those debts are addressed outside the scope of the divorce documentation.

How creditors view debt liability

When a married couple applies for a vehicle loan or a credit card, for example, they may list both spouses’ names on the application. This allows the creditor to assign liability for the debt to both parties.

As explained by Bankrate, so long as both names remain on the account, the creditor may view both people responsible to repay the debt regardless of what a divorce decree stipulates.

The Mortgage Loan indicates that home loan lenders follow this same approach.

Failure to repay a debt

If the spouse ordered to repay a debt per the divorce agreement fails to do so, the creditor may pursue repayment from the other spouse if both names remained on the account. The creditor may also submit negative information about missed or late payments to credit bureaus regarding both persons.

Options to protect against post-divorce debt problems

People who want to avoid being on the hook for their former spouse’s debt may look for ways to pay off all joint debt prior to completing their divorce. Another option may be to require the responsible spouse to transfer the original joint debt to a new account in his or her name only to ensure no joint liability remains after the divorce.