In the case of the dreadful event of a divorce, debt is one of the essential things that must be dealt with. You sort out issues on shared credit cards, loans you have cosigned, and mortgages. Depending on what state you live in, you could also be held accountable for your ex-spouse’s loan even if you had not cosigned. It’s best to speak with an experienced lawyer to best understand your specific situation.
Who Is Liable for the Credit Card?
Any credit card that is solely in your name is still your responsibility. Your ex-spouse cannot be held accountable for a credit card that bears your name only. If you shared a joint credit, you are as liable as your partner. When divorcing, the court handles the debts in two ways: common law or community property. Many countries and states follow the common law.
The common law states that you are held accountable for any debt in your name. These include:
- Credit card holding your name solely
- A credit card that bears both your name and your spouse’s
- A cosigned credit card, even if it is not owned jointly
Community Property Rules
The community property rules state that each one of you is held equally responsible for:
- Debts on credit cards that you own solely
- Cosigned credit cards even when not jointly owned
- Credit card debts incurred during the marriage with your partner’s name on them. It applies even if your name is not on the credit card.
There are some exceptions to these rules. It is legal for a judge to assign you a debt during the divorce, even if the debt is not in your name. It may happen due to what the debt was used to obtain.
In most cases, the debt is assigned to the one who makes more than the other. It might also go to the partner who was awarded full custody to the kids. In these cases, one partner will be required to buy out the other person’s shares in the house.
In case of a divorce, you should sell the house then share the money. Before you get a buyer, you decide who gets what share of the money. If you want to keep the house and your partner does not want to, you will contact the mortgage company.
You will then request the removal of your partner’s name on the mortgage. If the mortgage company denies the request, you can refinance the house without your partner’s name.
What if Your Partner Files Bankruptcy?
If your ex-spouse cannot keep up with the debts and other financial responsibilities and files for bankruptcy, it could be a problem for you. Unless you file for bankruptcy, the bankruptcy of your ex does not protect you.
IF your ex-spouse files for bankruptcy to get rid of a joint debt, the debt is not erased in the court. It only removes their liability for the debt. In this case, the creditor can follow you for the total amount if you do not file for bankruptcy.
Divorce is always full of legal proceedings, and deciding how to take care of the debts will only make it harder. It would be best if you took the necessary steps in the early stages of the divorce. It will help you avoid impacting your credit score negatively. Also, take care of the joint debts as early as possible and get your name written off the joint debts. It will prevent you from finding yourself in numerous financial problems.