Who pays joint debt after a divorce?

On Behalf of | Nov 10, 2020 | Property Division

From credit cards to automobile loans and more, divorcing couples must figure out how to deal with their shared debt when they part ways. The decisions about these debts generally becomes part of the larger property division settlement negotiations.

Once a couple reaches an agreement about their shared debt, each spouse should learn about how to protect themselves from unnecessary collection efforts based on the actions of the other party.

Divorce decrees and creditors

A divorce decree logically details all of the terms of a couple’s property division settlement. However, as explained by U.S. News and World Report, these terms may mean little to nothing to a creditor. What a creditor pays primary attention to is the name or names listed on the debt account.

Joint account, joint responsibility

A divorce decree may assign responsibility for a credit card balance to one spouse. But, if the couple allows the joint account to remain showing both person’s names, the bank may view both people as liable for the debt. When the person identified as responsible for the debt per the divorce decree fails to make a payment, collection efforts may be initiated against both persons. This includes negative remarks made to credit bureaus as well.

Repaying debt or transferring to new accounts

If a couple cannot pay off debt prior to divorcing, remaining debt may be moved to new accounts in one spouse’s name only to avoid joint liability later on.

This information is not intended to provide legal advice but is instead meant to give separated or divorcing residents in Texas some idea of how their handling of joint debt in a divorce may impact them down the road.

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