Managing debt after a divorce can be tricky. A credit account is binding upon all account holders, regardless of marital status. If you have joint credit or debt and a judge orders your ex-spouse to pay off your debt, the creditor will still hold you liable if you signed for the account. Moreover, if you live in a state that observes community property laws, you may be on the hook for half of all debt incurred during your marriage.
Be Proactive
On separation, call your creditors to talk about your options regarding joint accounts. If you can, close joint accounts to prevent your ex-spouse from affecting your credit. Ask if you can remove your name from your ex's accounts or remove your ex's name from your accounts. Be sure to remove any "authorized user" account privileges as well. Your creditors are not required to automatically convert joint accounts to single accounts, especially if you don't qualify on your own. Keep all the accounts with your name on them in good standing. Crown Financial Ministries suggests you work out an arrangement with your soon-to-be ex to pay off joint debt before your divorce is final.
Follow the Judge's Orders
If debt remains by the time you divorce, abide by the judge's orders regarding the payment of bills. For example, you could be held responsible for debts that purchased items for the benefit of the family, like food or medical expenses -- even if they were placed on your spouse's credit card. It may still be possible to come to some agreement that can be finalized in your divorce decree about how to handle joint debt. For example, you could each mutually agree to split the debt evenly. You could agree that the items purchased with the debt will go to one spouse, who in exchange for exclusive use of the items will pay the debt. Or, you can sell the property to raise enough cash to pay off the debt.
Debt in Community Property States
In community property states, all debt incurred during a marriage is shared equally by husbands and wives. Community property is observed in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin and Puerto Rico. Some tribal communities also follow community property laws, and in Alaska a couple can opt into community property status. There's a chance the individual debts of your spouse will appear on your credit report, too, so you have a vested interest in remaining civil and responsive regarding the payment of debt.
Manage Well
Know that a divorce decree doesn't change your legally binding agreement to pay a creditor back for a loan. Your credit card company or mortgage holder is not bound by the terms of your divorce agreement. Complicating matters is being jointly responsible with someone you may no longer get along with, or who simply can't afford to pay the debt assigned in the divorce. Keep on top of the accounts and take every opportunity to work out agreements with your creditors when you can't make a payment. It never hurts to ask for an interest rate reduction or forbearance on a payment. A debt adviser for Bankrate.com advises that you regularly monitor all three of your credit reports and, if your ex-spouse isn't making payments, submit statements to the credit bureau explaining your situation. You may be able to take your ex-spouse to court to enforce the divorce agreement, but your creditors aren't likely to wait for that. In the end, if you can't get your ex-spouse to pay, you may have to pay. After all, it's your credit too.
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