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Caution: Divorce debt splits are irrelevant to creditors

When a couple divorces, the reaction is sure to vary among friends, family and others concerned. Some may express sympathy. Others might wonder why it didn't happen sooner. Still others may limit their reaction to offering heartfelt advice on how to get through what can be a complicated process based on their own experiences.

Their expressions and opinions, while surely well intended, are irrelevant because your situation is not their situation. This may be particularly true in matters related to division of assets and debts. And perhaps the parties least interested in the specifics of how a couple plans to handle debt are those to whom money is owed. 

Experienced attorneys in Ohio and West Virginia can attest that regardless of what may be spelled out in the divorce decree, debts remain the obligations of both ex-spouses. Creditors don't care who's named in the divorce as payor. If payments are missed, they will go after whomever they can to get what's owed.

So, here are some suggestions on how you may be able to avoid getting left in a financial lurch and putting personal credit scores at risk.

  1. Prevent future charges: This may be hard with co-signed accounts, but in cases where one spouse is only an authorized user the privilege can be cancelled, and should be. For accounts held jointly, consider putting a freeze on anyone using it.
  2. Pay off joint debts before the divorce is final: If there's nothing owed, there isn't anything one or the other spouse can be held accountable for after the divorce is final.
  3. Dig out old cards and cancel them: This builds off item one. Check your credit report carefully for old accounts that may be inactive but still live and shut them down.
  4. Shift balances: If you agree to divvy up joint debts, shift the balances to new accounts in your individual names.  
  5. Build in contingencies: An agreement on paying debt doesn't do much good if the spouse who takes on the obligation later gets the debt discharged in bankruptcy. Creditors will simply go after the other party. For solid protection it may be a good idea to provide in writing that a debt can't be discharged through bankruptcy.

Whether these are options for you may depend on the laws of your state. Contacting an attorney is always advised.

Source: Fox Business, "Debt and Divorce: 5 Steps to Make a Clear Credit Split," Dawn Papandrea, July 14, 2014

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