Dividing Debts In DivorceDividing debts in divorce is something that's not talked about a lot, and many divorced people learn the hard way that a divorce decree doesn't change the contracts you made when married. If a debt was incurred together, both spouses are equally responsible for paying it back, regardless of what your divorce decree says. You can't force a creditor to abide by an agreement you make later with your spouse. Debt Liability in Community Property States As if being responsible for joint debts wasn't bad enough, you also need to be aware of how debt responsibility for individual accounts is handled in different states. In community property states such as Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin, both spouses may be held responsible for all debts incurred during the marriage. This can mean that creditors can come after you for repayment of a debt that your spouse never informed you about. To help protect yourself if you live in these states, full financial disclosure is important during settlement negotiations. You should make a detailed list of all account numbers, amounts owed, and who is responsible for each of the debts. Ordering a copy of your credit report can help you get started. Adding An Indemnity Clause To Your Divorce If your spouse will be responsible for a debt after the divorce, you need to be sure to add an indemnity clause to your settlement agreement. Worded properly, this will allow you to take your ex back to court for any money you had to pay as a result of the loan going into default. An indemnity clause will also give you means to have the debt removed from your credit report. Consult with your lawyer about this before signing the final papers. Protecting Your Interests On Secured Loans No matter what state you live in, don't allow your name to be taken off property deeds or vehicle titles if your name is still on the loan. If your spouse will be keeping the home or vehicle, you need to make sure that the loan is refinanced in his or her name only. In fact, you should add language in your divorce decree requiring such. Unfortunately, what often happens is that one spouse keeps the house and the other signs the quitclaim deed, but the mortgage is never refinanced in just one person's name. Later on, when the mortgage goes into default, the innocent spouse is held equally responsible for the debt, but yet has no claim to the actual house. The lesson here is that you shouldn't take your name off a deed or title if you name is still on the loan. You don't want to be paying for something that you no longer own. ©Tracy Achen 2008 At WomansDivorce.com we have one focus - helping women survive their divorce and rebuild their lives. Get more information about how to protect yourself during divorce in Divorce 101: A Woman's Guide. For more information on dividing debts in divorce, as well as tips on how to protect your credit, read the following articles:
Divorce and Credit Card Debt
Home / Other Articles / Divorce Guide / State Resources Books / Store / Contact Us / Chat / Privacy / Links / Newsletter 
|
