What Happens To Debt In Divorce?

Joint Finances

In the same way, married couples share their income regardless of whose name is actually on the paycheck, and they share responsibility for debts created during the marriage.

Debts added to a shared account will be considered the responsibility of both parties. If your name is on the loan, you are responsible for the debt, even after separation or divorce.

Separate Finances

Accounts in the name of only one spouse can also be subject to division. The primary consideration will be when the account or debt originated.

If one spouse had debt before the marriage that hasn’t been paid off when the divorce occurs, the debt will likely remain the sole responsibility of the individual. For example, student loans will typically remain the responsibility of whoever the student loans were taken out for.

Credit Card Debt

Credit card companies will pursue payments from both parties on the account, regardless of who the court decides is the responsible party. 

If your name is on the credit card, unpaid debts could hurt your credit score even if the court has made your ex responsible for the debt through divorce.

Mortgage Debt

It’s common for divorce decrees to make the marital home the possession of one person. If both spouse’s names are on the mortgage, both are responsible for the debt.

The divorce decree doesn’t pay off the mortgage or take a spouse’s name off the mortgage. Whichever spouse keeps the home in the divorce will be responsible for transferring the mortgage into only their name.

After divorce, if the home is given to your spouse, it’s important to make sure that your name is removed from the mortgage and deed to the house. Removing your name protects you from financial damage if the house goes into foreclosure.

Auto Loan Debts

If both spouses are on the name of an auto loan, they will most likely sell the car to pay off the loan and split the proceeds. 

Auto loans and vehicle possession could also be assigned to one of the parties in the divorce during the property division. How auto loan debts and vehicles are divided will depend on the specifics of your divorce.

Medical Debt

Medical debt accrued during the marriage is typically considered joint debt, even after divorce. If the medical debt involves children from the marriage, it will almost always be a joint debt.

There are some exceptions to medical debt being considered joint debt. For elective procedures, the debt will typically be the responsibility of the individual who benefited from it.

Issues in Paying Debts

Understandably, if the court orders you to pay debts with your spouse, you may be worried that they won’t pay their debts to ruin your credit score. There are a few ways you can try to avoid this.

You could request to be responsible for paying the debt yourself. In this case, you may also get more marital assets to help you avoid financial stress from taking on the debts.

Debts incurred after the separation began can be more difficult to divide. They may still be handled as if they weren’t separated and considered joint debts, or they could be treated as separate.

How debts are considered after separation will depend on the specifics of your divorce and your spouse's financial situation.

Protecting Yourself From Debt

To protect yourself from debt, you should stop using joint credit cards. Avoiding joint credit cards will help identify who the debt belongs to.

You should close any joint accounts that you may have. You should also remove your name from joint cards and as an account cosigner. Closing joint accounts and removing your name will help identify who created the debt.

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Dividing debts can be a challenging aspect of divorce. Determining how debts and assets are divided and understanding what that means for you can be complicated.

You must work with an attorney you trust to get the best representation and outcome in your divorce. Jason Campbell is an experienced local divorce attorney dedicated to fighting for his client’s rights.

It’s never too early to start preparing for divorce. Contact Campbell Law today to learn more about how we may be able to help you through divorce.