When debts can become a problem in divorce
California couples who are ending marriages are often concerned about whether they will take away their fair share of marital assets. But just as important as assets is something that can make property division more complicated, debt.
Division of debt in divorce is different from the division of assets because creditors do not automatically recognize a couple’s divorce decree. For example, if both spouses share a credit card account, then both of them can be responsible for paying any debts accrued on the credit card. Unfortunately, failing to consider marital debts before and during property division can have long-term effects on a spouse’s credit rating and ability to get credit in the future, something that may be critical in the months and years following a divorce.
Fortunately, an individual can protect his or her credit rating before the divorce is final. First, determine what accounts the spouses jointly hold. A spouse can ask a creditor to freeze or put an account on hold so that no new charges can be made; this can keep a vengeful spouse from racking up debt or hitting the credit limit. Second, check the credit records and ratings from the three major credit-rating agencies to make sure nothing out of the ordinary appears in any of them. Third, if possible, settle all jointly held debts before filing the divorce papers.
Debt may be part of most individuals’ finances, but no spouse should leave a marriage with an obligation to pay off marital debts that are largely the responsibility of the other spouse. The process of resolving debts before the divorce is final can be daunting, but competent and experienced attorneys are available to help a spouse navigate the issues involved.
Source: Fox Business, “Debt and Divorce: 5 Steps to Make a Clean Credit Split” Dawn Papandrea, July 14, 2014