Many people struggling in their marriage may fear getting divorced in part due to the financial losses they may experience after splitting their assets with their spouse.
Once the decision to divorce has been made, however, spouses realize that they must not only split their shared assets but their debts as well. The division of debt should be approached carefully to protect each person’s post-divorce financial future.
Debt liability after a divorce
A divorce decree generally outlines the agreements made between the spouses during their divorce negotiations. This decree may indicate which shared debt shall be assigned to which spouse after the divorce. However, a creditor may not necessarily consider the divorce decree as an indicator of financial liability for a debt according to Bankrate. Instead, a creditor may consider both spouses liable for a debt if both of their names remain on the account even after their divorce is over.
A person who thought they were free of a certain debt may find themselves pursued for repayment by a creditor should their former spouse fail to pay the debt. Both spouse’s credit reports may reflect any missed payment or late payments as well.
Mortgages and the family home
The Mortgage Reports explains that the same concept applies to home loans, even if the couple signed a quit claim deed assigning full ownership of the property to one spouse only. This reality supports the decision so many divorcing couples make in selling their family home during a divorce. The choice to keep a marital home should be evaluated financially, not emotionally.