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Credit cards, mortgages and other debt in your divorce

On Behalf of | Aug 24, 2020 | Divorce

Retirement accounts, family homes, stocks and more may all end up on the table and subject to split between two spouses when a couple gets a divorce. When both parties engage in negotiations to determine how they may allocate their marital resources, they must also figure out how they might share their marital debts.

The agreements made regarding asset and debt division eventually end up in the final divorce decree. This, however, may not sufficiently protect one or both parties down the road.

Creditors and divorce decrees

A divorce decree is a legally binding document, yet a bank or other creditor may not necessarily consider that when pursuing collection efforts on an outstanding debt. Bankrate explains that when a divorce decree names one spouse as responsible for specific debt, the creditor may still attempt to collect from the other person should that person’s name remain on the account.

Paying off the debt prior to the completion of the divorce offers one method of avoiding this. Another option some couples utilize is to have the debt transferred to a new account solely in the name of the spouse who must repay it per the divorce agreement.

Mortgage lenders and home ownership

When one spouse opts to keep the family home after a divorce, the couple must understand the ramifications for the corresponding mortgage. According to The Mortgage Loan, the person keeping the house should apply for a new or refinanced mortgage in their name only. If the joint mortgage remains, delinquent payments and even foreclosure activity that may result could appear on both spouse’s credit reports.