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Debit and Divorce

The Debt Dilemma

Divorce clients often assume that a debt held in the sole name of his or her spouse is not the client’s responsibility to pay.
Sometimes this is true, but not always. The question is not that simple. As usual, the devil is in the details.

The first question is to determine who is directly liable on the debt. Was that credit card taken out in the name of only one of the spouses, or do both parties own the card such that they are both legally liable for that obligation? In other words, can the credit card company sue only one of you, or both of you, for nonpayment? Running a credit report may help with the answer.

In a divorce context the actual usage of the credit card does matter. Purchases made for the benefit of the family during the marriage will be treated as joint marital debts, regardless of which party is directly liable to the card company. So that debt, as a joint debt, can get distributed in the overall assignment of assets and debts.

On a related note, if a jointly liable debt is assigned in the divorce to only one party to pay, consider how trustworthy that party is to pay off that obligation and make the payments on time. Your own credit rating may take a hit if there is a slip-up, because you are still legally liable to the creditor. The creditor is not prevented from coming after both parties in the event of non-payment.

Finally, be wary of entering an agreement whereby one party retains the marital residence and proposes to be solely responsible for paying the mortgage. Not only are you taking a risk that your Ex may not pay the mortgage, but your credit report likely will still show you to be liable for the mortgage, regardless of what the Decree states. Your ability to borrow in your own name may be compromised for so long as you are still liable to the mortgage company.

Division of debts can be a complex matter, with more ramifications than appear on the surface.

Richard Ralls of Ralls Law Firm can assist you in determining whether you can enforce grandparent rights. Call us at 913 236 7260 or 816 421 4222. Licensed in Kansas and Missouri.