Married couples frequently worry and fight about money. In cases where a couple is headed for divorce, it’s important to take steps to ensure money, and specifically shared debt, doesn’t continue to be a source of conflict post-divorce.
When possible, couples who plan to divorce should do their best to pay off all joint debts. In cases where a couple lacks the assets to eliminate debts prior to finalizing a divorce, matters related to joint debt must be negotiated and worked out during the divorce settlement process. It’s important to note, however, that a simple divorce decree in which each spouse promises to assume and repay certain joint debts, does not absolve either spouse from their legal responsibility of repayment.
How then can an individual who cannot pay off shared debt protect his or her credit score from taking a major hit if an ex doesn’t follow through on his or her promise to repay certain debts? When possible, it’s wise to request that a soon-to-be ex-spouse transfer the remaining debt balance held on a jointly-held account to an individually-held account. If a spouse is unwilling to transfer the debt, it may be best to assume the debt in exchange for a greater share of marital assets.
In addition to active joint accounts with known debt balances, it’s also important to identify and take steps to close old or rarely used joint accounts. If left open, a vengeful or cash-strapped ex-spouse could use an old account to rack up debt for which an ex-spouse would still be legally responsible to repay.
Divorce is often accompanied with financial surprises and struggles. It’s important, therefore, that individuals who are going through a divorce take steps to ensure shared debt is accounted for and taken care of prior to a divorce being finalized.
Source: Fox Business, “Debt and Divorce: 5 Steps to Make a Clear Credit Split,” Dan Papandrea, July 14, 2014