Divorce is never easy and when it comes to the money part of divorce, it can become a situation that ends bitterly. With debts, it can be a hard topic to deal with in the midst of divorce. Just like assets are divided up between the couple, the joint debts will also be divided between the couple.
Dealing With the Laws
Each state has specific laws concerning divorce and debts. It many cases it does not matter which name is on the debt or who has filed for divorce, both parties in the divorce may be held responsible for incurred debts.
Many couples will work between themselves to figure out who gets what debt and they can sign a formal agreement concerning debts for the court to consider. If te couple is not able or willing to agree on the debts of the marriage, the divorce court will make the decision about debt division.
Divorce courts will generally divide up the joint debts in a manner that is equitable but not equal. In other words, the judge will consider different factors in the debt division including the income of each individual, child custody arrangements, level of education each party has, and the potential for future earnings.
If in your divorce certain debts were assigned to your ex-spouse, you may still be held responsible for those. This causes a lot of problems in divorces that are contentious because if the ex-spouse fails to pay off debts, creditors can still hold the other party responsible for the debt balance and pursue legal action against both parties. This also means if your ex-spouse defaults on a debt, the creditor can send information to the credit reporting bureaus and the debt will have serious consequences for your credit.
In the event a spouse declared responsible for a debt in a divorce does not fulfill their payment obligations, a contempt of court action can be filed by the other spouse. This contempt will let the court know the person failed to follow the decree of divorce and the spouse filing the action can seek reimbursement for the debt being paid. Many states will also allow attorney fees to be paid by the spouse violating the decree.
Consideration for Bankruptcy
When the divorce court divides the couple’s debts, a spouse can file for bankruptcy in order for other debts to be discharged but not the debts that are part of the divorce decree. Bankruptcy should be the last straw when it comes to financial hardships but can often be necessary in divorce when money is especially tight.
Financial arrangements in a marriage should be an important focus. While no one anticipates a divorce when getting married, it is wise to consider the financial implications if a relationship goes wrong. People are getting more comfortable these days with prenuptial agreements that hash out money matters prior to the wedding.