The Impact of Dividing Debts at Divorce
Allison Gerli • September 22, 2020
What Happens To Debt After Divorce? Who is Responsible? What You Need To Know.
You and your spouse may have accumulated debts of various types during the course of your marriage. If so, you are probably concerned about how to divide those debts and what the consequences will be if the debts are not paid, particularly if you do not trust that your spouse will be responsible about making payments.
If a debt was undertaken by you and your spouse jointly (generally the case for home mortgage and car loans, and often the case for credit cards), you and your spouse probably are jointly and severally liable
for payment of that debt. This means that the creditor can pursue either or both of you to obtain payment.
The creditor (bank, mortgage company, department store, credit card company, etc.)
is not a party to your dissolution of marriage proceeding. In the divorce settlement, the debts will be allocated between you and your spouse by agreement or, if you have a trial, the Judge will order who is responsible for each debt.
Despite the allocation of debt in a divorce judgment, debts in joint names will remain in joint names, unless the person the debt is allocated removes the other party from responsibility. The creditor is not bound by any agreements reached between the two of you as to who is responsible post-divorce, nor is it bound by a court order as to who is responsible for the debt. A creditor can still pursue either you or your spouse for an unpaid debt, regardless of who the court designates to pay the debt.
As a result, it is important to understand that, even when a court specifically orders that one party is solely responsible for payment of a home mortgage or other loan or other debt, if both parties’ names remain on the loan or debt, both parties remain responsible for its payment. Transfer of the title of your home by quitclaim or other deed does not in any way alter your obligation under an existing mortgage loan.
The divorce judgment may include an indemnification and hold harmless clause. Typically, these provisions are used so that a party who agrees or is ordered to pay a certain debt is responsible for reimbursing the other party if the other party ends up paying the debt instead. Although these clauses do provide you with recourse through the courts should your former spouse fail to pay a debt, as a practical matter, if the creditor has been unable to collect form your former spouse, your chances of doing so are not much better. Your goal should be to reduce the risk of problems related to the marital debt post-divorce.
What To Consider When Settling Your Case
If you are hoping to settle your case, it is important to consider your spouse’s likelihood to responsibly pay the debt that is allocated in the settlement. The spouse’s failure to pay, or failure to pay on time, can affect your credit rating and of course impact you in other ways.
Sometimes parties agree to delay selling or refinancing the house for a period of years so that one of the spouses can remain in it after the divorce. Often that spouse is not able to qualify to refinance at the time of divorce. If you are the non-resident spouse and you are considering this option, you need to consider what this could mean if you want to purchase a residence or take on some other large debt before the time for your spouse to refinance or sell the home arrives. The obligation on the mortgage may result in your being denied credit, even if your spouse is paying the mortgage on time. This is something that we may need to discuss as settlement options are generated.
It may be important for both spouses to obtain credit reports to ensure all debt is being disclosed and addressed as part of the divorce process. This is something that can be requested of both parties to a divorce.
Please discuss your current debt situation with your attorney so that the appropriate measures such as closing accounts may be taken to protect your credit rating and preserve martial assets. You need to be aware of all outstanding debts when preparing settlement options or proposing how property and debt will be divided at trial.
If you have questions or concerns about your situation, the
attorneys at The Center for Family Law are here to help.
We are proud to share that Ann Bauer will be honored at the 27th Annual Women's Justice Awards on April 10, 2025, as one of this year's recipients in the "Mentor" category. This award celebrates experienced legal professionals who have played an important role in guiding and supporting the next generation of attorneys. Ann’s journey in family law began with co-founding her first firm in 2009, eventually leading to the establishment of The Center for Family Law in 2013. What began as a small practice has grown into a dynamic firm with a team of attorneys and staff dedicated exclusively to family law. Ann has been the heart of this growth—leading with purpose, mentoring with compassion, and consistently advocating for positive change. Ann's unwavering commitment to transforming how families navigate legal separation has helped shift the focus from adversarial litigation to a more compassionate approach to resolution, especially within the collaborative divorce process and in mediation. Her philosophy and approach to family law continue to influence and guide a new generation of legal professionals and practitioners she has mentored throughout her career. Whether she's mentoring within the firm or taking the time to speak with a law student, Ann is always generous with her time, wisdom, and support. She also shares her expertise through active service on numerous committees dedicated to family law and domestic violence. Please join us in congratulating Ann on this well-deserved honor. We are grateful for her vision and proud to continue building on the foundation she helped establish at The Center for Family Law.
The Center for Family Law is excited to announce the start of its fourth year hosting the Second Saturday Divorce Workshops, providing valuable support and guidance to individuals navigating the divorce process.
The holiday season can be a balancing act for all parents, but it can be especially challenging for divorced parents who need to coordinate plans with a former spouse and navigate interactions with new partners. While some stress is to be expected, with careful planning, flexibility, and the right mindset, you can make the holidays smoother for everyone. Here are a few tips to help you manage. Prioritizing the Children. The holidays are a time for children, and their well-being should be the focus of the schedule. Whether it's your first holiday post-divorce or you have had a few years to adjust, there are simple steps you can take to make the season easier for them. Create a Joint Plan. Collaborate with your ex to ensure the children can spend time with both of you without feeling torn. A clear, shared plan helps avoid confusion and conflict. This might involve splitting the day between both households or longer periods of time with each parent to allow for out-of-town travel to visit relatives. It is important that parents are on the same page on what schedule will be followed and that is communicated to the children as a joint plan. Balance Traditions with Flexibility. It is natural to want to keep cherished family traditions, but flexibility is key. Discuss with your co-parent which traditions are most important and find a realistic way to divide them. This ensures that the kids do not feel pressured to choose between one tradition or family, allowing them to enjoy special moments with both sides. Create New Traditions. This is an opportunity to start fresh. Let go of old expectations and focus on what will bring joy to your current family setup. Whether changing when your holiday meal occurs or coming up with new ways to celebrate with those who matter now, these changes can redefine your holiday experience in a way that reflects your family as it is today. Remember, children care more about spending time with you and celebrating together than about the exact day. [The Right] Communication is Key. Keeping communication focused on the kids can help prevent old conflicts from resurfacing. Keep discussions brief and to the point. Set times to address important matters and confirm plans through a message or email to ensure everyone is aligned and to prevent miscommunication. Involving New Partners. Whether it is you or your ex with a new partner, you should be mindful of how this change can stir emotions and make the situation feel uncertain. If planning to include a new partner in holiday activities, having a conversation with your ex beforehand is best. Discuss your plans for the day and make sure your ex is comfortable with the arrangement. If you are nervous about being around your ex’s new partner, remember that you have the right to decide how much or how little to engage with this new person, all while keeping things positive and calm for the children. Children may also need time to adjust to a new partner, particularly if the relationship is still fresh. Monitor how they are coping and give them space to process these changes. Do not force interactions, and if possible, let the relationship evolve naturally. Spending Time with Former In-Laws. Another challenge during the holidays for separated parents is dealing with ex-in-laws. Seeing them may feel awkward, but it is often necessary for the children's sake. If spending time with your ex-in-laws feels too emotionally challenging, be honest with yourself and them. It is okay to politely decline an invitation if it being there would cause too much stress. Regardless of how you feel about your ex-in-laws, remember that ex-in laws are still important figures in your children’s lives, and it is often best for the kids if you maintain a relationship with them. Encourage your children to spend time with their grandparents or other relatives from your ex’s family when possible. Remember even when feeling frustrated, remind yourself that cooperation between parents benefits the children, making these moments more manageable.