Marriage is all about sharing. You have to learn to share a home, share vehicles, share finances, share your bank accounts, and consequently, sharing in debt. When your marriage leads to divorce, more times than not, my clients are faced with debts, especially credit card, that can be complex when deciding how to pay off this debt and proceed with the divorce. Below are some simple ways to prepare yourself for getting divorced with debt.
Liability for Debt
In Maryland, you must have agreed to be legally liable for a debt before a creditor can come after you for payment of the debt. By liable, I mean you must have signed a loan, a mortgage note, applied for a credit card and signed that you agreed to be held liable for the debt. If you and your spouse jointly signed a loan or jointly held a credit card account, then you both can be held jointly and severally liable for that debt. This means that the creditor can come after you, your spouse, or both for the debt. Creditors are not required to pursue both of you equally, meaning they don’t pursue you and your spouse equally for payment. Creditors aren’t concerned about which one of you they get their money from; they are only concerned about getting the money due to them.
In order to remove liability for debts that your spouse might have incurred there are a few things that can be done before the divorce is finalized. Ideally, both spouses would jointly pay off the debt, but this sometimes isn’t possible. Another possibility is to pay off the joint debt accounts with another marital asset. This will ensure that you are using marital assets to pay off joint marital debt. If the debt was incurred without your knowledge or was debt that was not incurred for the benefit of the family, you should seek legal advice about how to remove yourself from liability for the debt.
I always recommend that you pull and review your credit report each year. Ensure that there are no open lines of credit that you are not aware of. Many of my clients find they have been victims of credit card fraud, that an account that they thought was closed actually wasn’t and now has a balance on it, or they simple weren’t informed that they had been added to their spouses account and are now being held liable for it. I also recommend thoroughly reviewing your checking and savings accounts monthly to ensure there are no unauthorized charges on any of your accounts. Whether going through a divorce or not, you always should take notice in your credit report to ensure that everything being reported is accurate and true.
Splitting the Debt in Divorce
There are two ways that divorcing parties can remedy the payment of their debts:
- Enter into a separation agreement which can set forth a timetable for paying off the debt, how the debt will be paid, and who is responsible for paying the debt. The beauty about a separation agreement is that the parties can save their credit by reaching an amicable resolution within a specific timeframe to paying off the debt. Some clients use tax refunds, retirement assets, or even obtain a personal loan at a much lower interest rate to pay off the joint debts.
- Litigate the divorce and ask a judge to decide whether or not the debt was “necessary debt”. Necessary debt can include any debt that was incurred for the benefit of the family, such as to pay for food, shelter, transportation, or medical bills. The court then can assign this debt to be paid by one parent or the other. Necessary debt does not include debt incurred by one spouse to support an affair. Oftentimes, I find that if one party has had an affair, a credit card has been opened and any expenses for that affair, such as dinners or gifts, were put on the credit card. If this has occurred, you should seek legal advice to ensure that this debt isn’t added to your marital debt and most importantly that marital assets aren’t being used to pay off this debt.
Navigating Debt & Divorce
More and more couples are finding it inevitable that some forms of marital debt will be incurred during their marriage. The tricky part comes in when you are divorcing and you want to ensure you have a clean financial break from your spouse, but how to pay off these debts can be problematic because if you could afford them, you wouldn’t have incurred the debt to begin with. An attorney can advise you on the steps you need to take to ensure that you protect your credit, ensure which debts you are going to be held responsible for, and to help you find a means to pay off any marital debt so that you start your new life with a clean slate.
Family Law Attorneys in Montgomery County, Maryland
We recognize that divorce is emotionally exhausting, but it is also a time for reflection and renewal and, when necessary, we will help you find the right professionals to guide you through this period and into your new life. At the law firm of Andalman & Flynn, we always impress upon our clients the idea that divorce is as much a new beginning as it is an ending. Hiring the right family law attorney to represent your best interests in your divorce is essential to ensuring you will have the freedom, happiness, and financial independence you deserve in your new life.
If you need a family law attorney in Montgomery County or surrounding areas, contact our legal team for a consultation.
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