Debt and divorce. How to handle your finances during a divorce isn’t an easy task. Since approximately 38% of marriages end in divorce in Canada, it is no wonder that people want to know how to deal with their own debt and marital debt during divorce. This article will explain your options and comes from the office of a noted debt defense and bankruptcy lawyer in Philadelphia, PA.

You Are Not Responsible for Your Spouse’s Debt

If your spouse incurred individual debt before or during your marriage, you are not responsible for paying it. In other words, no creditor of your spouse can come after you for their debt.

However, the court may reassign individual debt in the course of the divorce proceedings. For example, if one spouse incurred debt while supporting the other through education or training, the supported spouse may have to pay some of that debt.

A problem arises if someone fails to pay debt per the court order. Then, a creditor will pursue the spouse whose name is on the lending contract. If this is you, it may be prudent to make the monthly minimum payments in order to maintain your good credit, while your lawyer assists you in getting compensation and forcing your ex to pay.

You and Your Spouse are Jointly and Severally Liable for Marital Debt

If you incurred debt jointly, you are each responsible for paying the whole amount. While this might not seem fair, creditors may pursue one or the other of you, or both of you, until the debt is paid.

Here is where it can get sticky. The court may order one or the other to pay the joint debt, but if that person fails to pay, the creditor can pursue the other for payment. Look into refinancing joint debt in the name of the person who has accepted responsibility for paying the debt or the person who was ordered by the court to pay. This avoids problems for the other spouse in the future.

For example, the marital home is commonly mortgaged jointly. If one or the other intends to remain in the home, it may be prudent to refinance the home in that person’s name.

If Possible, Agree on How to Manage Joint Debt Before Divorce

You both should pull your credit reports from Equifax and TransUnion and, if possible, discuss what debt appears on each. If the divorce is not amicable and you are unable to reach a preliminary agreement about your debt, know that eventually it will be settled but by the court, but in the meantime, things will get messy.

You can take steps to protect yourself financially, such as removing your spouse’s name as an authorized user on any credit accounts, freezing joint accounts, and opening an individual account to deposit your income and pay your expenses.

What if My Ex Files Bankruptcy?

Unfortunately, it is common for one or both divorcing spouses to file bankruptcy due to the financial burden of establishing and maintaining two households on the same amount of income used to maintain their single marital household.

If your former spouse files bankruptcy, they will be discharged of most unsecured debt, including any joint credit cards or personal loans, and maybe discharged of secured debt such as a mortgage or a car loan if they surrender the collateral in their bankruptcy case.

What does this mean for you? If your spouse is discharged of any joint debt, the creditor will pursue you for payment even if the court ordered your ex to pay it in your divorce proceedings. Your only recourse at that point is to seek an order from the court for reimbursement for having to ultimately pay that debt.

If you are struggling with joint debt issues during or after your divorce, speak with a professional who specializes in debt management options. If you are struggling with joint debt issues during or after your divorce, speak with a professional who specializes in debt management options. Contact us, for a free consultation, by calling us on 1-888-890-0888 or visiting www.debtcare.ca.

About the Author

Veronica Baxter is a legal assistant and blogger living and working in the great city of Philadelphia. She frequently works with David Offen, Esq., a busy foreclosure and bankruptcy lawyer in Philadelphia, PA, U.S.A.