Divorcing spouses often find splitting their marital assets one of the biggest challenges of their divorce process. However, they must be aware that any shared debts may also need to be split or assigned to one party when they get divorced.
Understanding how creditors view debt liability after a divorce is important for anyone in this situation.
Debts, account names and divorce decrees
After going through the arduous process of deciding which spouse should repay which debt after a divorce is finalized, the details of the agreement may be documented in the divorce decree. However, Bankrate warns that consumers should pay special attention to which names remain on any credit accounts as well.
A divorce decree may indicate financial responsibility for a debt to one party but if both spouses’ names remain on the account, the creditor may consider both still liable for the debt. Missed or late payments may be reported to credit bureaus against both spouses. Collection efforts may target both spouses. Some couples attempt to repay any joint debt prior to completing their divorce to avoid these scenarios.
When it comes to mortgages, even signing a quit claim deed that grants full ownership of a property to one spouse may not prevent a lender from pursuing repayment against the other person should their name remain on the loan.
Student loans and use of funds
Student loans may be taken out in one person’s name only, but they may be deemed marital debts. As explained by Student Loan Hero, the use of the funds may dictate whether or not the debt is considered solo or joint.