As described in Debt and Divorce in Georgia, Part 1, many divorcing couples have significant debt issues. These debt issues may be in the form of credit card debt, home mortgages, or multiple home equity lines of credit. Regardless of the type of debt, one thing is clear – although debt can be a significant issue for married couples, it becomes a much bigger problem to deal with upon divorce.
When spouses choose to settle the issue of debt division between themselves, there are typically three viable options for the couple to choose from:
1. Agreeing to pay off debts prior to divorce – If you and your spouse have cash, or if you have property that you can sell for cash, paying off your debts prior to divorce is simpler and safer for both of you. If you can work together to solve the credit issues, sometimes that is the best way. If this route is chose, there will be no uncertainty about the eventual cost of the debt, and you both will know exactly what you have as you begin your new independent lives.
2. Agreeing for one spouse to take primary responsibility for the debt – If you agree to be responsible for a debt, you need to know exactly how much debt you are responsible for, and what you need to do to get the debt satisfied. This may necessitate you communicating with your soon to be ex-spouse concerning how to contact creditors or how much certain monthly payments will be. Be sure to obtain all the information you can about any debt before agreeing to take responsibility for it upon divorce. On the other hand, if you agree that your spouse will be responsible for a debt that the two of you share, be warned that you are still vulnerable. Although your attorney may insert some type of indemnity clause in your agreement in which your spouse agrees to hold you harmless for the repayment of the debt, this indemnity clause is only binding between you and your spouse, not on third parties. This means that even when your spouse agrees to pay off the joint credit card debt and agrees to indemnify you for it, if your spouse later does not pay off the debt, the credit card company could come looking for you and make you pay the debt. If this were to occur, you would indeed have a claim against your ex-spouse for payment of the debt, but enforcing your marital dissolution agreement in this regard would necessitate you initiating a completely new legal action. This is why many choose to take the above mentioned option, if at all possible.
3. Agreeing to take equal responsibility for the debts – Agreeing to share equal responsibility for payment of a debt is potentially the worst option. Not only do you increase the extent to which you have to continue communicating with your ex-spouse about money after the divorce, but you still run the risk that your ex-spouse will default on the debt that he or she is responsible for, thus leaving you vulnerable to third party creditors.
Your goal upon divorce is to limit your entanglement with your ex-spouse, no to increase it. Thus, instead of agreeing to share a given debt equally, divide up your individual marital debts some roughly equal fashion according to how the debts was incurred and according to who logically should be responsible for the debt. Your goal is to finish with a list of debts for which you havesole responsibility, and a separate list of debts for which your spouse has sole responsibility.
By A. Latrese Martin, Associate Attorney, Meriwether & Tharp, LLC