We’ve spent a lot of time here on our blog discussing the distribution of marital assets. However, as Philadelphia family lawyers we see just as many couples who are deep in debt.
When that happens, debts, and the responsibility to pay those debts, get divided just like assets would. However, things can get sticky, because your spouse can refuse to pay the debt. When this happens you could find yourself fielding collection calls and watching your credit score plummet. Your creditors don’t care what your divorce decree says. Thanks the the peculiarity of the legal system, they don’t have to…they can continue holding you responsible, and they will.
So what can you do?
During the divorce, protect your right to take your spouse back to court over unpaid debt.
An indemnity clause can give you this protection if your spouse doesn’t uphold his or her half of the bargain. You may still have to pay debts your spouse agreed to pay to keep creditors off your back, but you can then seek restitution because your spouse violated court orders to pay.
Incidentally this is one example of how people can get themselves into trouble in a DIY divorce. We’ve seen plenty of DIY neglect to use these clauses, only to get themselves burned later.
Make refinancing or liquidation part of the settlement.
Is your spouse getting the home? Your name shouldn’t be on the mortgage anymore. Refinancing can help to solve this problem.
Of course, your spouse’s credit may also be too damaged to allow for refinancing. This is an instance where it might be appropriate to demand the house be sold so you can either split the proceeds of the sale, or pay creditors as appropriate.
Cancel your spouse’s “authorized user” status.
If you have added your spouse as an “authorized user” to any credit card held in your name then take him or her off. You don’t want them using the card to make new purchases, and sadly, some people absolutely will.
Joint credit card accounts should be cancelled immediately so no new debt is accrued.
Keep an eye on things.
Don’t assume your spouse is paying court-ordered debts. Order your credit report or check the status of those accounts on a regular basis to be sure. You don’t want to find out when the collection agencies come calling. By then, your credit has already been trashed.
Pay it off before your day in court.
Many divorcing spouses find it mutually beneficial to pay off as much debt as possible while they’re still legally married. It gets messy and difficult to hold your spouse responsible for debt once the divorce is done, even with court orders and indemnity clauses.
Recognize it may be easier to file bankruptcy than it is to get your spouse to pay.
Divorce gives you one kind of fresh start, bankruptcy another. If your spouse skips out on the bills and leaves you holding the bag discharging these debts may be the fastest, cleanest way to get rid of them. At that point creditors can only go after your spouse for these debts. It may hurt your credit score to do this, but not as much, in most cases, than if you’d fought a losing battle attempting to make your spouse pay debts he or she can’t or won’t pay.
Fortunately at Sadek and Cooper we handle both types of cases. Talk to us about your options during your free consultation.