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Dealing with debts during a divorce

On Behalf of | Jan 25, 2021 | Divorce

When couples in Florida go through a divorce, they divide both the assets they acquired and the debts they took on during their marriages. However, lenders are not bound by the terms of divorce agreements. This means that estranged spouses are sometimes pursued for payment of debts that they thought were no longer their responsibility. Making matters worse is that they often do not find out that their former husbands or wives are not making payments until the debt is delinquent.

Joint loans

When both spouses sign loan documents, the lender considers them jointly responsible for the debt taken out. In most cases, the bank or credit union will notify one or all of the major credit reporting agencies when payments are not made on time. Missed or late payments can cause credit scores and ratings to drop significantly, which is why it may be a good idea to ensure that all joint loans are either paid off or refinanced in one name only before finalizing a divorce.

Selling assets

Some people might believe that notifying lenders about the terms of their divorce agreements will protect their credit, but this will rarely influence how a bank goes about pursuing delinquent debts. When the person who will be responsible for future payments does not have the income or credit history to obtain credit under their name alone, it could be wise to sell the asset the loan was taken out to acquire, pay the debt off and then divide whatever money remains.

Divorce negotiations

Experienced family law attorneys may seek to avoid these problems by gathering information about all marital debts before property division negotiations begin. They could then advise their clients about any potential debt-related issues and recommend closing all joint accounts.