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Family Issues: Divorce & Debt |
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More Ask Susan |
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I am recently divorced. My ex-husband and I each received a car in the decree. My car is now paid off. However, the car that he assumed responsibility for in the decree is now going to be repossessed because he says he cannot afford to make the payments on it and he is tired of being in debt. Only his name is on the car note. Can my ex-husband just not pay this debt? Will they hold me responsible? -Teresa |
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Dear Teresa,
The counselors at MMI hear situations similar to yours every day. Unfortunately, a divorce decree is between you and your husband and not your creditors. Creditors legally do not have to honor the terms of your divorce and are within their rights to try and collect debts from either responsible party.
In some states, whoever signed the original contract with the creditor will still be obligated on the debt after the divorce. In community property states, it may be possible for both parties to be held responsible for debt acquired during the marriage, regardless of who signed. Because this is a legal issue, please check with your attorney for more information.
Good Luck,
The Advice Team
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I divorced my husband four years ago. Our divorce decree stated that we were not responsible for each others’ debts. This month, I suddenly received a nasty letter from one of the creditors. Apparently, my ex declared bankruptcy. They claim my divorce decree is useless when it comes to credit card debt. I am in a state of shock; I thought that this couldn't happen. -Linda |
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Linda,
I am afraid that the creditor is correct. The divorce decree is between you and your husband and not your creditors. The contracts you signed with your creditors have not changed and cannot be changed by the divorce decree. Your only recourse now may be to file contempt of court charges against your husband for his failure to abide by the terms of the divorce decree. Because these issues are legal in nature, you might want to visit with an attorney.
The Advice Team |
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It has been two years since my divorce from my husband. My ex-husband was to pay all bills as the courts stated in the divorce agreement. It also stated that I will remain harmless of all debts. I have now been receiving letters from companies asking for payment of debts. I just don't know what to do. The car we once owned is in his possession. It also stated in the divorce agreement that he is sole owner of the car. He was to remove my name from the car note, but hasn't. He is now late on that and the lender is now after me. What do I do? -Cheri
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Cheri,
Unfortunately, letters like yours are all too common. Divorce is such a difficult issue and it is a surprise to many to find out just how greatly it can impact your financial life.
I am sorry to tell you that your creditors are well within their rights in trying to collect the debts from you. A divorce decree does not cancel the original agreement you made when taking out the loans. Your best bet might be to cooperate with your ex-husband and try to get the debts repaid. That way, you can both begin your new lives.
Good Luck,
The Advice Team
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My husband and I have agreed to split up. I have heard so many horror stories from my friends and family that I am scared about the future. What can I do to protect myself financially? I can't afford to pay back everything we owe by myself. -Kelly |
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Kelly,
The first financial action after separation is to pull a copy of your credit report. You will want to review entries carefully and either close all joint accounts or change them to individual accounts. Alert your secured lenders of your marital status and instruct them not to allow any changes without your permission. You may also want to “freeze” joint bank accounts or divide any funds into two individual bank accounts.
To avoid future problems, develop a plan to pay off your debts prior to your divorce. This is important because your divorce decree is an agreement between you and your spouse—not your creditors.
Because there are many legal issues involved, you might benefit from the help of a trusted attorney.
Good luck,
The Advice Team |
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