Protecting Your Financial Future
Divorce can be emotionally and financially challenging,
particularly when it comes to resolving joint debts. While your divorce decree
outlines which party is responsible for specific debts, creditors are not bound
by this agreement and may still hold both you and your former spouse liable.
This blog will discuss how to navigate these complexities and protect your financial
well-being.
Understanding the Impact of Joint Debts
After divorce, joint debts like credit cards, mortgages, or loans
remain legally binding to both parties unless removed or resolved. For example,
even if the decree assigns responsibility for the mortgage to your ex-spouse,
creditors may pursue you for payments if the names of both parties remain on
the account.
Cancel Joint Credit Cards
If you and your ex-spouse share joint credit cards, cancel them
immediately following the divorce to prevent additional liabilities. Notify the
credit card company in writing via certified mail with return receipt
requested, to ensure the account is closed. This is the only sure way to
protect yourself from further charges.
Incorporate Hold-Harmless Language
Your marital settlement agreement should include "hold-harmless"
provisions. These clauses ensure that the party responsible for a debt
indemnifies the other against losses, including penalties, court costs, or
legal fees arising from non-payment. While this offers a legal recourse to
address missed payments, it does not shield you from a creditor's actions, such
as lawsuits or credit score impacts.
The Risks of Lingering Joint Debts
Leaving joint debts unresolved after a divorce exposes you to
significant risks. Your ex-spouse could face financial difficulties, become
incapacitated, or even pass away, leaving you solely responsible for the
remaining balance. Regardless of your divorce decree, creditors have the right
to seek repayment from any party named on the account.
Take Action Immediately
To avoid these pitfalls, make extinguishing joint debts a priority
as soon as possible after divorce. Work with your ex-spouse to refinance loans,
transfer balances, or settle accounts. The sooner you eliminate these shared
obligations, the sooner you can rebuild your financial independence and
security. By addressing joint debts swiftly and thoroughly, you can pave the
way for a secure financial future post-divorce.