Dividing retirement accounts, proceeds from home sales, vehicles, personal belongings and other assets commonly leads to challenges for a divorcing couple working out their property division agreement.
While spouses must figure out how to share their assets, they must also figure out how to address their joint debts when getting divorced.
Debt responsibility from the creditor perspective
As explained by Bankrate, a couple may agree that one spouse will repay a certain debt and they may document that agreement in their divorce decree. That divorce decree, however, may fail to protect the person not identified as responsible for the debt from being approached by the creditor for repayment should the couple allow the joint account to remain.
A creditor may consider anyone named on an account to be liable for the debt. This means they may engage in debt collection efforts against both parties should the person responsible per the divorce decree miss any payments or make any late payments. These missed or late payments may also appear on both spouse’s credit reports.
Mortgages and homes
The same concept that applies to debts like credit cards also applies to mortgages. A couple may agree that one spouse will keep the marital home after the divorce. They may even sign a quit claim deed assigning full ownership of the property to one spouse only. However, if the joint mortgage remains intact, the lender will view both parties as financially responsible for the debt.
Foreclosure actions, like missed or late payments, may reflect on both parties’ credit reports. These realities may cause significant financial challenges long after a divorce has completed.