The Silent Partner to Your Divorce

written by Jim Duzak |

If you and your spouse are thinking of getting divorced, there are almost certainly going to be other people involved, possibly for a long time to come. No, I’m not talking about your children—not today, anyway—or your relatives and in-laws, or your lawyers or the judge. I’m talking about your creditors.

In the overwhelming majority of divorce cases , there are joint debts that need to be apportioned. For the sake of simplicity, I’ll define joint debts as financial obligations in which both the husband and wife are legally liable, on a “joint and several” basis. (Joint and several liability means that it’s not a true 50-50 debt in any meaningful sense; the creditor can choose to pursue either or both parties for the entiredebt). Common examples of joint debts are mortgage loans listing both spouses as mortgagors; car loans in which both spouses are on the hook; and credit cards issued in both names.

Although debts incurred prior to marriage, such as student loans, tend to beindividual debts, unmarried couples can incur joint debts by purchasing a home or business together, or when one person co-signs for a loan that primarily benefits the other person. If couples with pre-existing joint debt get married and then later get divorced, the pre-existing joint debt will have to be apportioned in the divorce decree in the same way as joint debts incurred since the date of the marriage.

The key principle to understand in the apportionment of joint debt is that no one involved in a divorce case—not the parties, not even the judge—has the power to defeat the rights of creditors. Any lawful debt obligations incurred prior to the divorce remain in effect after the divorce, no matter what the divorce agreement says.

Let’s look at the case of “Joe” and “Michelle.” At the time of their divorce, they own two vehicles: a 2006 GMC truck and a 2007 Toyota Corolla. Although Joe thinks of the truck as “his” vehicle and Michelle is the only one who drives the Corolla, both vehicles are jointly owned and both names are on the vehicle loans. Because the vehicles were purchased with 72-month loans, the loans aren’t even close to being paid off.

What couples like Joe and Michelle often want is for each of them to keep the vehicle he or she usually drives, and to agree to be responsible for making the payments on that vehicle. It sounds pretty fair (assuming that one vehicle isn’t worth a lot more than the other), but what happens if Joe loses his job two months after the divorce and stops making the payments? Unfortunately, what will happen is that the finance company will press Michelle for the payments. And if she can’t pay, either, and the car is repossessed and sold at auction (for short money, I guarantee you), both Joe and Michelle are still jointly and severally liable for paying the portion of the loan not covered by the auction sale. And the repossession will dam...

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