I’ve discussed the idea of equitable division in an earlier post, but I thought it might be a good idea to discuss marital debt in a little more detail.  One of the more lingering negative effects of divorce is how your credit score might suffer if you and your attorney don’t plan for and successfully negotiate the right divorce terms.

JOINT DEBT:   Loans or mortgages to which you are a party or cosigner don’t just go away, even with a court order.  In these cases, you can still be held liable for unpaid spousal debts.  However, if you act quickly after the court issues the final order of divorce, you may be able to remove your name through refinancing or by agreement with the creditor.  You need to do this before your ex-spouse’s credit takes a nose-dive.  Also, as part of your divorce settlement agreement, you can have your ex-spouse agree to make a good faith effort to refinance debt in their name only.  Then, if the other party defaults, you are protected.

INDIVIDUAL DEBT:   As we’ve mentioned, in Alabama, debts are divided “equitably” between the parties. As with the assets, “equitable” division of debt does not mean equal. Fortunately, in Alabama, you can’t be held accountable for debts you were unaware of or are not a party to.  That’s why it is very important that you fully disclose all debts and assets during the divorce process and require your estranged spouse to do the same.  Often times, in the rush to end the marriage, these debts can be overlooked.  This is why finding the right attorney to protect your interests is important.  If you want to trust your post-divorce financial future to the lowest bidder, you may regret it.

INDEMNITY:   Be sure to discuss the benefits of negotiating an indemnity clause with your attorney.  Including an indemnity clause in your divorce settlement will give you some legal leverage with your ex spouse if they fail to pay debts as ordered or agreed.  You may even be able to take them into small claims court or file a contempt action if they violate the final divorce order of the court.  This may help protect your credit score in the long run.

As always, every divorce is different and marital debt division can be addressed in traditional or creative ways.  Make sure you raise the issue with your attorney and that you clearly understand the terms of any divorce agreement before signing up.  If you have further questions, I am happy to offer a free case evaluation at your convenience.  Call me at (251)445-0891 or email me at ron@mcbaylaw.com.

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