The May Firm

People often believe that a divorce will relieve each spouse from joint debts.  Unfortunately, this is not true.  In fact, liability on joint debts cannot be relieved simply by dividing the debts and assigning liability in the divorce.  A divorce only apportions liability on debts between spouses and does not affect the ultimate liability to the creditor.  The most common example occurs with liability on a home mortgage.  Often, spouses jointly incur mortgage debt; then, upon divorce, one spouse takes the house and agrees to pay the mortgage balance.  However, the spouse that leaves the house and mortgage is not automatically relieved of that liability to the mortgage company.

Frequently credit card debts are held primarily in one spouse’s name primarily, even where both spouses may have signatory authority.  In these situations, the spouse who is the primary cardholder should take that debt in order to be in the best position to protect his or her credit.  This is true even where the debt is out of proportion to the overall division of the marital estate.  I had one situation where the bulk of the credit card debt was held in the wife’s name, but on divorce the husband was ordered to pay it.  The wife came to see me for help when the husband failed to make the payments, signficantly harming the wife’s credit. Unfortunately, there was very little I could do for the wife in that situation.  The husband cannot be held in contempt for violation of the divorce order for payment of debts because our U.S. Constitution prohibits “debtor’s prison”.  Obtaining a judgment against husband for the unpaid amounts would be meaningless to the wife — if the husband could pay a judgment, he would probably be paying the credit card payments.  In that situation, about the only advice I could give the wife was to seek the advice of a bankruptcy lawyer.

As for joint debts, the only way to be sure that the credit of the spouse not taking the debt after the divorce is protected is to payoff the debt using assets available in the marriage or using debt solely in the name of the spouse assuming the debt.  For example, if the parties are jointly responsible for a credit card debt, then the spouse assuming the debt could open a new account in his/her name only and transfer the debt to that account.  Then, the joint account would be closed by both parties.  Or, where a car loan is in both names, one spouse could refinance that debt into his/her name only.

Several problems exist regarding this proposal.  First, a court cannot force a spouse to refinace or incur debt in his/her name only.  So, this must be done by the agreement of the parties.  Or, where a spouse already has credit problems and cannot obtain new credit, this will not be a viable option.

There is no great solution to the problem of dividing jointly held debts in divorce.  If you know that a divorce is on the horizon, work with your spouse as early as possible to address joint debts.  Of course, if you aren’t able to do this, contact Dallas Divorce Attorneys at The May Firm for assistance.

Tags: Divorce, Debts //