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Dividing debt and safeguarding your credit as you divorce

On Behalf of | Jan 15, 2024 | Property Division And Asset Preservation

While a key focus of many divorces is dividing assets, debt also must be divided when a marriage ends. And sometimes, when one spouse has been less than responsible with money, the other can find themselves fighting to avoid leaving the marriage saddled with debt they didn’t inspire.

Moreover, if a less financially responsible spouse doesn’t fulfill the commitments made during divorce to pay off their portion of the debt, the other spouse can suffer a drop in their credit score. That can hamper their ability to buy (or even rent) a new home, get favorable interest rates and even (depending on their line of work) get a job in their profession.

How can you start dividing joint debt?

If you are divorcing and you have a mortgage, that’s likely your largest debt. If your spouse is keeping the home and taking over the mortgage, it should be refinanced in their name alone (or vice versa). The same is true with a home equity loan.

You also probably have one or more joint credit cards. You may have a car loan, boat loan or personal loan. There are varying ways to divide this debt. Oftentimes, divorcing spouses will each take responsibility for paying off individual credit cards and loans. Whatever arrangements are agreed to – or ordered by the court in the event of a litigated split – needs to be detailed in the divorce agreement so the obligation becomes enforceable.  

Why getting your name off debt is important

It’s important to understand that credit card companies and other lenders don’t recognize divorce agreements. If your name is still on an account, you’re just as responsible for the debt as your ex. If they don’t make the payments they’ve committed to, your credit can suffer.

That’s why it’s often wise to get your name off any credit cards or any other debt-related accounts that your ex has responsibility for paying off. It can be harder to do that with loans. If your name remains on any of these accounts, continue to monitor them to ensure that your ex is making the required payments. If your ex isn’t complying with the terms of the agreement, you may be able to take legal action. It’s also crucial to monitor your credit report during and after your divorce.

If you don’t trust your soon-to-be ex to pay off debts or you fear they’ll file for bankruptcy and stick you with the shared debt, be sure to discuss this with your legal team upfront so you can find debt division solutions to help avoid those scenarios. Don’t minimize the importance of leaving your marriage on sound financial footing.

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