Protecting assets when getting divorced commonly becomes a priority for spouses who know they must split up their marital estate.
However, the process of negotiating a property division settlement also includes discussions of how to split any shared debt the couple may owe.
Joint debt and the creditor perspective
Most people understand that when they open a credit card with a spouse and both people’s names appear on the application, for example, the creditor considers both people responsible for any debt incurred on that account. When a couple who share a credit card account gets a divorce, one spouse may end up with the responsibility to repay the debt. Their divorce decree may outline this agreement. However, as explained by Bankrate, a divorce decree alone may not provide sufficient support to eliminate the other party’s responsibility in the eyes of the creditor.
Some couples choose to repay joint debt prior to completing their divorce as one way of preventing issues down the road. When that may not be possible, the party responsible for a debt may opt to transfer the originally joint debt into a new account in his or her name only.
Mortgage lenders take the same approach
The Mortgage Reports indicates that a bank issuer of a home loan also considers both spouses responsible for the mortgage payments so long as the joint mortgage remains intact, even if a quit claim deed assigns full ownership to one spouse only. When the responsible party misses a payment, the lender may pursue collection efforts against the other person should that person’s name remain on the loan.