Wednesday, September 19, 2012
Joint credit card debt and divorce
A divorce needs to address all marital assets and liabilities. Included in the liabilities are joint credit card debt. The final divorce judgment should address the joint credit card debts and explain who must pay the debt. The debt can be split between the spouses or one spouse may have the responsibility to pay the entire debt.
While one spouse may be responsible to pay the debt, this does not mean that the other spouse is free from ramifications of the debt. Creditors are not parties to the divorce and are not effected by the divorce decree. Another way of stating this is to say that a divorce judge can't order a credit to stop trying to collect a credit card debt from both spouses. Creditors are free to continue to take action against both spouses including listing the debt on the credit reports of both. If the husband is ordered to pay a credit card debt, the wife may find that she can't borrow money until this debt is paid in full. If the husband pays the debt but consistently makes the payments late, the wife's credit report may suffer along with the husband's.
The situation is the same with other joint debt such as auto loans, home mortgage loans, and business loans. The best way to deal with this potential problem is to have a lawyer draft language that does more than just obligate a spouse to pay a joint debt. The language should require indemnification as well.