If you and your spouse decide to part ways, you have a lot to think about, including who will assume responsibility for what debts. While you and your spouse may have shared the financial load during your marriage, outstanding liabilities can quickly become a contentious issue.
According to InCharge Debt Solutions, family courts divvy up debt just as they do assets. This means that any “marital debt” becomes the responsibility of both parties, and any “separate debt” remains the sole responsibility of the person who opened the account prior to tying the knot. The problem is, though, that like with assets, debts can quickly become comingled. When this occurs, how do the courts assign responsibility, and can they enforce payments?
Most debt accumulated during marriage is marital property
Unfortunately (or fortunately, depending on which way you look at it), most debt that you and your spouse accumulated during your union is property of the marriage. This means that the judge presiding over your case will likely allocate it evenly. If the judge does decide to saddle one party with more debt than the other, it may offset the obligation by granting said party more assets. Types of debt that fall into the “marital property” category, despite whose name is on it, are as follows:
- Credit card debt
- Auto loans
- Mortgage loans
- Medical bills
The theory is that whatever lead to the debt contributed to the household and family unit.
The courts cannot enforce payment
It is important to note that a judge can assign debt in a divorce, but he or she cannot enforce its repayment. Even if, per your divorce decree, your spouse is legally responsible for, say, a joint auto loan, he or she could ignore the payments. If this happens, you may be on the hook for late fees and collection costs, and your credit score may suffer.
The bottom line is: If your name is on a loan, you are responsible. Lenders do not care that you went through a divorce or that the judge assigned a debt to your spouse — they only care about receiving their payments. If you insist upon saddling your ex with debt that has your name on it, push to include an indemnity clause in your divorce agreement. With this type of security, you have the option to petition the courts if your ex defaults and demand that it administers legal consequences.