When divorcing couples have debt, it is important to resolve issues regarding liability (legal responsibility) for the outstanding debt. Often spouses have not only credit cards, but may also have a car loan and a line of credit. If you are unable to pay the marital debt off immediately, it is important to consider the possible consequences of any payment arrangements you and your spouse agree on.
The first step is to make a list of liabilities, making note of who is ‘owed’ the debt, the balance owed, and the name of the spouse listed on the loan or credit card. Some liabilities may be held by both spouses jointly, while others may be in only one spouse’s name.
When trying to divvy up the debt, one spouse may decide to take over payments of roughly half of the debt as part of the divorce settlement agreement. However, even if one spouse agrees to make the payments on certain debts, if a loan or credit line is jointly held, the lender is not a party to the agreement so any late payments or a sudden inability to pay will still be the responsibility of the other spouse too.
It is in the interest of the non-paying spouse to keep on top of debt that is also in their name to make sure that payments are being made as agreed and have a contingency plan to fill in the gaps. It goes without saying that if there is a line of credit open in both spouses’ names, it should be closed so no funds can be drawn, or charges made, by either spouse while the remaining balance is being paid off.
If, on the other hand, a car loan or credit card is issued in one spouse’s name only, a failure to make payments will only affect that spouse in the eyes of the lender. However, if a spouse fails to uphold their end of the divorce settlement agreement, a trip back to court may get them back on track. Working with your attorney is recommended if your ex is not making the agreed upon payments.
Questions on Dividing Marital Debt in a Divorce?
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Call Illinois property division lawyer Ronald L Bell at 847-495-6000 for assistance with dividing marital debt and asset division, child and spousal support, parenting time and responsibility or other family law concerns you may have.