Any person who has gone through a divorce or who may be in this process of getting divorced now knows that there is no aspect of this experience that is easy. Separating from a partner impacts every aspect of life and carries with it emotional as well as financial repercussions. One issue most married couples must address is how to deal with their joint debts.
The lender’s view of financial responsibility
As explained by U.S. News and World Report, any person who is named on a credit card or loan account may be deemed legally and contractually responsible for the debt by the lender despite what any divorce settlement documentation says. During a property division negotiation, one spouse may be identified as responsible for a given debt. If that person, however, fails to pay the debt, the lender may pursue repayment from the other party. Late or missed payments may be reported against both spouse’s credit reports as well.
Bankrate notes that some mortgage lenders may allow one person’s name to be removed from a loan, leaving the original loan intact and assigned to one party only. This may not likely be possible for credit card accounts.
Options for divorcing spouses
One strategy many couples choose is to pay off all of their joint debt before they get divorced or as part of their divorce process. This may not always be possible, however. If that is the case, it may be wise for a person assigned some debt to transfer that debt into a new account in their name only. This may be in the form of a refinanced mortgage or a new credit card onto which a balance from another card can be transferred.