As Philadelphia family lawyers, we’ve seen it again and again. Debt is one of the most common reasons for divorce. Even “good” debt, like student loan debt, can cause enough strife to end a marriage. The problem can get even worse when one or both spouses are keeping secrets about spending, a growing problem that has led to the common use of the term “financial infidelity.”
It’s one of the most common sources of confusion during a divorce case. Here’s what you need to know.
Debts get divided just like assets do.
Marital assets are divided up under the equitable distribution law, but so are marital debts. In fact, in some marriages some spouses have far more debts to divide up than assets.
A marital debt is any debt for any account opened after the date of marriage and before the date of divorce. And you could end up footing some of the bill, even if your spouse was the spendthrift who ran up big balances. Sometimes your spouse’s conduct in the marriage matters less than you might think.
Just like marital assets, marital debts aren’t always split 50/50. There are a variety of factors which go into a judge’s decision about who pays what, just like there are when marital assets are divided. Those factors won’t always seem to make a lot of sense.
You may end up court-ordered to pay debts which are in your ex’s name.
The name on the debt doesn’t matter to judges if it’s a marital debt. This is especially true if both spouses benefited from the debt, or if one spouse benefited more than the other. If your ex ran up his or her credit card paying for your college textbooks, for example, you might end up with that credit card debt because you were the primary beneficiary of the money spent.
And because you’ve been court-ordered to pay this money, you can be charged with contempt of court if you default on the debt.
Creditors have no obligation to pay any attention to your court order.
Some spouses do default on court-ordered debts, just like they default on child support payments. And your creditors don’t care.
If your name is on the debt, they can and will report the problem to credit bureaus. Sooner or later your credit score will tank. Collection agencies will start calling. They’ll tell you you’re still on the hook for the debt, and they’ll have the law on their side.
Many spouses have thrown up their hands and paid for the debt just to save their sanity. Be careful before you let your spouse accept a greater share of the marital debt in exchange for other concessions. You can end up with major problems long before you manage to drag your ex back into court for the show-cause hearing.
Bankruptcy may be necessary before you can get back on your feet.
Sometimes the financial chaos left in the wake of a divorce settlement is just too much to take on your own. Filing for bankruptcy to erase all the debt can be a great first step.
Left with a clean slate, you can rebuild your financial life and start over again. It may also be the only way to save your sanity, especially if you got saddled with debts you didn’t even know about.
Of course, we work hard to help our clients avoid unfair settlements, but courts can be unpredictable. And even a settlement you agree with can come with debts which are too much to handle alone. It’s a good thing bankruptcy exists to help divorced spouses start their lives again!