Many reports or discussions surrounding a marital divorce focus on the losses each spouse may experience due to the need to split their assets as part of their property division settlement.
Divorcing spouses, however, may also need to split the responsibility for any joint debt they incurred while they were married. Understanding how this responsibility plays out once the divorce decree has been signed by a judge is important for anyone going through a divorce.
Account ownership and financial liability
When a couple opens a joint credit card, for example, both spouse’s names may appear on the documentation. This identifies both parties as equal owners on the account, making both parties responsible to repay any credit utilized. In a divorce negotiation, one spouse may agree to assume responsibility for the debt related to that credit card account after the divorce.
As explained by Bankrate, if the original account remains with both parties names listed on it, the creditor may consider both parties still responsible for that debt regardless of what the divorce decree indicates.
According to The Mortgage Reports, home loan lenders may follow the similar rule and approach when it comes to mortgages. This reality may complicate matters when one spouse wants desperately to stay in their family home after the divorce.
Debt collection and credit report issues
If the spouse who agreed to pay a debt as part of the divorce fails to do so, the other person may find missed or late payments showing up on their credit report. They may also receive requests from creditors or other debt collectors to repay the debt so long as their name remains associated with the account.