One of the primary issues divorcing couples must work out is property division. This includes both assets and debts. In both equitable division states (such as Georgia) and community property states, a final divorce decree will outline exactly how marital property is to be divided and how marital debts are to be allocated. Community property states will divide all marital property and debts equally, but the divorce decree will still specify how it will be equally divided.
While a final divorce decree will protect you in court if your spouse is not making payments on a joint debt for which the divorce decree made him responsible, the creditor itself will not be appeased by the court order. This is because the divorce decree is between you and your ex-spouse – the creditors do not sign off, nor are they a party to the agreement so they are not required to abide by it. Thus, if your ex-spouse dies before he/she has fully satisfied a debt in both your names, the creditors are likely to come after you. A dead ex-spouse’s debt can become your problem, by Jeanne Sahadi, money.cnn.com, June 25, 2014.
For example, consider a situation wherein you and your ex had a joint credit card for which he was responsible post-divorce, but he dies before he has paid it all off. In that case, the credit card company will likely come after you for payment because your name is on the card as well. If you don’t pay it, it could be detrimental to your credit. You could try filing a claim against his estate, but this takes time so you will likely be forced to pay it in the interim so you don’t damage your credit.
There are a couple things you could try to do to lessen your risk:
- Request that your settlement agreement/divorce decree have a clause requiring the party responsible for the debt post-divorce to refinance the debt to remove the other spouse’s name. Houses and cars can be refinanced. If your ex will not be able to qualify to refinance into his own name, consider taking on the debt yourself along with some additional assets to balance it out. That way, payment of the debt will be in your control. Not all debt can be refinanced this way but it is worth a try.
- Estate planning attorney Geoff Germane of Kirton McConkie suggests that, at the time of your divorce, “you could try to enter into what’s called a ‘novation’ or ‘accord and satisfaction’ with the creditor to erase your further liability for the debt. This is essentially an agreement with the creditor that you are no longer responsible for the debt.
Though neither of these options is foolproof, they are certainly worth a try to reduce your risk of being later help responsible for a debt from which you assumed you were already safe.