How will our debts be divided when we divorce?

Assets are not the only property divided upon divorce. Liabilities or debts must also be divided. Here are examples of some common debts that are divided in a divorce.

1.) Mortgage:

Generally parties agree that one spouse will keep the house after divorce. Technically, the other spouse (who was not awarded the house in the division of property) remains accountable for that house mortgage until the note has been paid off or refinanced. In the decree, the judge will award the house to one party and order that spouse to pay the note but if the he or she defaults on those payments, the mortgage company will still look to the other spouse for payment. However, if a party defaults on the mortgage, an instrument called a Deed of Trust to Secure Assumption (signed at the time of the divorce) gives the other spouse to the right to resume ownership of the house and foreclose.

Both parties’ names for the mortgage may still appear on credit reports, thus possibly affecting credit and the capacity to secure a mortgage for another residence. In some instances if you send the mortgage company a copy of the Deed, Deed of Trust, and Divorce Decree they will remove one spouse’s name (the party who did not receive the house in the divorce) from the credit reports.

Also, while pursuing a new mortgage sending these same documents to possible lenders from whom you are seeking credit, may make them more likely to ignore that mortgage obligation.

2.) Credit Cards:

Both parties need to decide who will keep which credit cards. Then you must notify the credit card companies that you are divorcing and that (1) if the account is one that your spouse is keeping, you are no longer responsible for any future debts on it, and (2) if it is an account that you are keeping, you are no longer responsible for any future debt that your spouse incurs on it. It is helpful to send letters signed by both of you if you can.

Bear in mind that creditors are not bound by the division of debts in your Divorce Decree. If your spouse agrees to take on a credit card debt that was previously in both names and he or she does not pay that debt, the credit card company still has the ability to sue you for the amount that is owed. Consequently, it may not be a good idea to equalize the division of property by giving your spouse debts that he or she may not pay.