Paying Joint Debts
In addition to all of the personal upset of having to ensure that all your assets are divided properly when you get divorced, there is further pressure when it comes to dealing with your joint debts.
Even though you may be ending your joint partnership in marriage, this has no bearing on any outstanding joint debts, including car loans, credit cards, mortgages etc. A joint credit agreement means joint liability and if you owe creditors money, they will still have to be paid.
What You Should do First?Once you have decided to go ahead with court proceedings, you should immediately try to freeze any joint accounts you may have if you owe the creditors money. This prevents either side running up any further debts on their own which, as joint account holders, you will be liable for also.
You cannot close these accounts completely as you still owe money on them but you can at least stop further debt being accrued. However, lenders are under no obligation to freeze accounts but only to close them once any outstanding balances have been paid. Therefore, if they won’t freeze the account and you still have available credit left to spend, it’s a good idea to reduce your credit limit to the level of the debt owed so that no further spending can take place on the cards. You’ll then have to come up with some sort of agreement between you as to how you both intend to repay the outstanding debt. This, of course, may not be easy, so it’s important to keep your lawyer informed too and seek advice if needed.
Where you have other joint credit card or store card accounts but you do not owe any money on them, you should simply close these accounts immediately.
Ultimately, it will be up to lawyers to draft an agreement between both parties about how you are going to divide up the debt but this can take several months so don’t take any chances and freeze any further spending on the agreements in the meantime. It’s also important to let your creditors know that you are going through a divorce as they may be able to give you additional time to sort your finances out, although they are under no obligation to do so.
What if One Partner Goes Missing?If you have outstanding joint credit agreements in place and there is debt to be repaid and one of the couple goes missing, the creditor will come to the other joint signatory if they cannot track down the main cardholder. This can often be extremely stressful, especially where the main cardholder is the biggest earner and may have possibly run up the majority of the debt yet can’t be tracked down, leaving the lower income partner to have to try to deal with the debt as it is in joint names.
This is less common in divorce scenarios than in joint credit agreements where a couple is not married as people who are going through a divorce are less likely to disappear off the radar as there are usually assets to be divided and children to consider too. However, it should be emphasised that any pursuit of a debt relating to a joint credit agreement can be made on either party and it’s not a case of saying you will be liable for half of the debt accrued but not the other 50%. If no contact and subsequent agreement can be made with one party, then the other is liable for the total debt on the joint agreement that was made.
Usually, an amicable settlement on assets and debts should ensure that debts are divided up and paid off with the same due diligence and fairness as the assets are divided up. If everybody – meaning both you and your ex - and the legal teams on both sides are all working towards as swift and fair division of assets and financial responsibilities as possible, you may find that creditors may allow you some time to get your houses in order before insisting that the debts are settled.
The key things are to ensure that no more debts can be accrued in joint names and that, once all is settled and you go your separate ways for good, you should also ensure that all joint financial obligations are severed completely too. Failure to do that can not only lead to more debt but can also affect your credit ratings too.