Joint Debts and Divorce
In a divorce, it is common for the parties to have join debt. While there is a lot of focus on dividing up the assets of a marriage, often, not enough attention gets paid to dividing up the debt of a marriage.
A final divorce decree (or settlement incorporated into a final divorce decree) is a court order. Court orders regarding responsibility for payment of debts and liabilities are effective between you and your former spouse, but do not bind a joint creditor that you and your former spouse share. If you still maintain joint credit cards with your former spouse, the only sure way to protect yourself against liability for further charges is to cancel the credit card.
Your Decree should indicate which party is to assume responsibility for payment of certain debts or obligations. For example, if your former spouse is awarded the marital residence and is ordered to assume full responsibility for the payment of the mortgage (but fails to make the payment), the creditor will most likely look to you for the payment of the mortgage until such time as your former spouse removes your name from the mortgage.
We recommend putting “hold-harmless” language in your Settlement Agreement or Decree which protects the person not responsible for the debt if the situation arises in which the responsible person fails to fulfill his\her obligation for the debt. With the hold harmless language, the person responsible for the debt or obligation promises to indemnify or protect the other from any loss or expense connected with that debt or obligation, including any penalties, court costs, and legal fees associated with the failure to pay the debt.
While hold-harmless language provides you a means of bringing a contempt action against your spouse, it does not prevent a third party creditor from bringing legal action against you first, or prevent the creditor from damaging your credit while your spouse does not pay the monies as they become due. The practical consequence of leaving a joint debt with your spouse dangling out there is that your spouse could die, become insolvent, or become disabled. This could leave you responsible for the debt, regardless of what the decree says. So, make it a priority to extinguish all joint debts with your spouse as soon as practically possible.
