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Splitting debts as well as assets during a divorce

| Aug 24, 2020 | Family Law |

When a person embarks on a divorce, they often put a lot of attention on what assets they may retain and what things must be split or given up to the other spouse.

In addition to splitting assets, a divorcing spouse must also decide how to allocate responsibility for any debt they share with their partner.

Divorce decrees and creditors

A final divorce decree outlines all of the terms of a couple’s divorce once both parties have come to a mutual agreement or a judge has made any necessary rulings in the matter. While a legally binding document, the divorce decree may not fully protect a former spouse from credit collection efforts or negative marks on a credit report based on the actions of the other person.

Bankrate explains that if a couple allows a joint credit account to remain intact with both person’s names on the account, the creditor may view both people as responsible for the debt regardless of the terms stated in their divorce decree. If the person responsible for the debt per the divorce settlement fails to make payments, the other person may be pursued for repayment. Paying off any joint debt prior to finalizing a divorce is one strategy some couples employ to avoid this scenario.

Mortgages and keeping the family home

When one spouse wishes to keep the family home after a divorce, the other person should be aware that keeping the joint mortgage intact exposes them to the same risks as keeping a joint credit card account active. The Mortgage Reports suggests that the person who may keep a house apply for a new mortgage in their name only.