Going through a divorce means that things obtained during the marriage have to be divided. Many people assume that this has to do with assets, but part of the property division process has to do with dividing debts.
Learning a bit about what may happen to debts during a divorce can benefit anyone going through this because they can use that knowledge to protect their interests.
Marital vs. separate debt
The first step in determining how debts are divided is to distinguish between marital and separate debts. Marital debt is any debt incurred during the marriage, regardless of whose name is on it. This could include credit card balances, car loans or mortgages. Separate debt, on the other hand, is typically any debt that one spouse brought into the marriage or incurred individually after separation.
Joint vs. individual debt responsibility
Co-signed loans and joint credit accounts can complicate debt division in a divorce. Even after a divorce, creditors can still pursue both spouses for joint debts, like a mortgage or joint credit card, until the debt is fully paid, regardless of what the divorce decree says. This means that even if the court assigns responsibility for a debt to one spouse, the other could still be held liable if payments are missed.
It’s crucial to ensure that all debts are clearly assigned and, where possible, refinanced or paid off. This is one way that anyone going through a divorce can protect themselves from potential damage to their credit score.