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How Divorce Affects Your Debt

A lot of people ask how divorce affects your debt. Whether you are responsible for your ex-husband’s or ex-wife’s debts depends on the circumstances surrounding the issue, your state law and perhaps most importantly, who signed the credit contract.

For instance, if your name is still on the credit contract you are still responsible for the debt regardless of what the divorce decree states.

It’s important to understand that a divorce decree only spells out who is supposed to pay the debt. It does NOT legally change who is responsible for the debt.

When couples divorce, they usually agree on who pays what. For example, a car loan is in both names and the divorce agreement states that the ex-wife keeps the car and is responsible for making the payments.

Several months later, when the ex-wife defaults on the car loan, collectors start calling her and her ex-husband. The ex-husband claims that the debt is not his because his ex-wife got the car and the payment in the divorce.
The collector says it is the ex-husband’s responsibility and will pursue legal action if he does not pay up. The collector is correct and will probably win in court!

During thje divorce process and especially after the divorce is final, divorcing couples would be wise to have joint credit contracts revised so that only the name of the person responsible for the debt is on the contract.

Be advised that creditors are reluctant to do this, especially after a divorce, because experience tells them the chances of the loan becoming overdue is high and so having two people responsible for the debt is better because if one ex-spouse defaults, the lender can still pursue the other ex-spouse.

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