Handling debt problems during divorce

On behalf of The Walters Law Group, Ltd. posted in Divorce on Friday, May 10, 2013.

How a family court decides to allocate property and debts depends largely on whether the state is considered a community property state or an equitable distribution state. In community property states, the presumption is that debt is community debt and unless a spouse can prove otherwise with clear and convincing evidence, the debt is the equal responsibility of each spouse to pay after the divorce. In equitable distribution states like Illinois, a spouse is not usually liable for a spouse’s debt if his or her name was not listed on the account as a joint account holder. Even if the person was an authorized user on the account, he or she is generally not liable for the debt if he or she lives in a non-community property state.

When couples are going through divorce, there are certain steps that each spouse should take to protect their legal interests. Acquiring a credit report can alert the spouse to any existing debts. Making a list of accounts can help organize information before the final divorce decree. Closing joint accounts can help the spouses keep their finances separate after the separation.

A family court judge may order that certain debts be paid before the final decree. He or she may also allocate certain debts to certain spouses. For example, a spouse who retains the car may retain the debt associated with the car. He or she can also take additional factors into consideration, such as unique expenses or recent property transfers when deciding how to divide the debts among the spouses.

Individuals who are concerned with the allocation of debt during a divorce may retain their own family law attorney. This person may be able to advise a spouse on protecting his or her legal interests.

Source: Fox Business, “Is Wife Liable for Ex’s Card Debt?“, Sally Herigstad, May 07, 2013