Financial challenges often contribute to strife between married spouses. In some situations, the problems may grow to such a state that they lead to the ultimate downfall of the relationship. This leaves spouses left to figure out how to deal with their shared debt when they get divorced.
A property division settlement may well apportion or split assets, but it also addresses shared debt. The manner in which debt liability is determined may have an impact on both spouses long after the divorce is over.
Debt responsibility and divorce decrees
After working through the negotiations and coming to an agreement about which spouse may repay which debt, the terms of that agreement may be outlined in detail in their divorce decree. Bankrate notes, however, that leaving things at this point may expose the person not responsible for a debt to financial problems later on should their spouse fail to repay the debt as promised.
When a creditor does not receive payment on a debt, they may pursue collection activities against the party or parties named on the account. Should a joint credit card account remain active with both names after the divorce is over, the creditor may approach both persons despite the terms of their divorce decree. Negative marks may also appear on both people’s credit reports.
Mortgages and post-divorce home ownership
The Mortgage Loan explains that home loan lenders take the same approach as do their credit card counterparts, looking at the names on the mortgages to determine who to approach for repayment. This may well contribute to many couples’ decisions to sell their homes during a divorce.