The Piper Must be Paid

When you and your spouse part ways, you divide what you own and what you owe, and great care is required because a misstep can ruin a credit rating as well as make for post-divorce court appearances.

If you live in a community property state, you are responsible for debts incurred during the marriage and it does not matter whose name is on them. If you live in an equitable distribution state, debts in your name are yours alone, but you are responsible for debts taken in your name, even those without your consent. In all jurisdictions, joint credit card debt is jointly owned.

Debt division has some fine points when a court becomes involved. For example, debts found to dissipation — for example, extravagant high living with a paramour — may be non-marital even though they are incurred during a marriage.

The most common and best way to deal with joint debt is the pay it off as part of the marital settlement — often using the proceeds of the marital house or other assets. By doing so, you and your spouse make a clean break from each other, and the two of your eliminate one friction point that can and does ignite when couples decide to share the debt and continue to service it together. Joint debt carries with it joint and several liability. This means that XYZ Credit Card Co. can go after each spouse individually for debt that is in both their names. The credit card company is not concerned with the terms and conditions of the separation agreement.

Dividing the joint debt and sharing it sounds reasonable because you have some control of the debt and don’t have to come up the all the money, but it carries the risk of damage to a credit rating if your spouse defaults on his or her share of the debt reduction. Once again, the creditor can come after you despite what a court says about debt division.

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