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What Happens to Debt in a Divorce?

What Happens to Debt in a Divorce?

Posted in Divorce

You can divorce your spouse, but it may not be so easy to divorce yourself from the debt that you built together during your marriage.  Americans tend to run up lots of household debt. Debt.org claims that the average American household has over $15,000 in credit card debt, and Bankrate.com did a survey that reports over 50 percent of Americans do not have enough emergency cash to pay off credit card debt.  This debt can haunt you both during and after the divorce process, as credit companies aren’t bound by divorce decrees. They are able to go after you for debts held jointly if your former spouse doesn’t pay.

The experienced and compassionate Illinois family-law attorneys at Wolfe & Stec, Ltd. understand that divorce is difficult enough without having to worry about debts incurred during your marriage, especially those run up by your ex-spouse. We can provide professional guidance to examine your situation and provide specific strategies to protect you and your children before, during and after the divorce process.  We offer a free consultation to discuss your options to make sure your debt ends when your marriage does.

What Illinois Law Says

In general, if you and your spouse have co-signed for debt during your marriage, the debt is the joint responsibility of both.  An exception is when one of you is just an additional cardholder on the spouse’s credit card.

Illinois is an equitable distribution states, and the law requires that all marital debts be divided just like other property.  The courts will examine your financial situation and determine which spouse should be responsible for what debt.  Equitable does not mean the debt will be split equally in two, as some spouses may wind up with more debt and receive other marital assets to make the financial picture more equitable.

Unfortunately, just because debt may be assigned to your ex-spouse, it doesn’t mean that you will never be responsible.  In Illinois, creditors are not required by law to follow the judge’s orders, so should your ex stop making payments on joint debt, the creditors can try to collect from you. If your debt was held jointly, you may wind up responsible for the debt held plus interest and penalties. Even if your divorce agreement has provisions to force your ex to pay, going to court to enforce them is expensive.

How to Protect Yourself

It’s always best if you and your spouse can work together to eliminate debt before your divorce, but it is not always possible to do so.  Taking the following steps can help:

  • Get a Copy of Your Credit Report. Avoid unpleasant surprises. Make sure your credit status is good and that your spouse hasn’t run up debt and loans without your knowledge.  Consider signing up for a credit fraud protection service to alert you to unknown activity.
  • Leave the marriage without any jointly-held debt. If you can, work with your spouse to set a date after which agreed-upon portions of joint debt are to be transferred onto new cards in each person’s name and joint cards are to be canceled. You can either pay off the joint cards together or divide the debt already on your joint cards between you and put the debt on the new cards. If you cannot agree, be sure to make a list of all joint credit cards and accounts and cancel them before the divorce to prevent your spouse from racking up more debt.
  • File documents with the courts stating the debt for both parties in order to record how much debt was held on the date the relationship ended. This helps prevent your spouse from running up debt that you might wind up responsible for later.
  • Keep good records of your own charges after your separation date, since that is when debt on credit cards becomes the responsibility of the spouse who made the purchases. Also, you want to be able to prove what is yours.
  • If your debt is overwhelming, you might be able to use joint savings or take a home equity line of credit in your home to help. If this is not an option, you may want to consider filing for bankruptcy to get out from under your credit card and other debts.  It’s best to file for bankruptcy together to make sure that neither party gets stuck with the debt and that you discharge your debts before you start separate lives.
Additional Reading:  What to Expect in a Divorce Action

Get Help – Contact Us For a Free Consultation

Every divorce is unique, as financial situations, personal property and circumstances differ, and children may be involved.  Some couples can come to an agreement and work out their debt differences amiably; others fight a bitter war to the end and wind up having a difficult, expensive, and drawn-out contested courtroom proceeding.

Since divorce is so complex and emotionally sensitive, it is most important to have an experienced divorce attorney on your side who has your best interests at heart. The skilled Illinois family-law attorneys at Wolfe & Stec, Ltd. have helped countless families dealing with divorce.  We will fight to protect your spousal rights and personal assets and guide you through each step of the divorce and post-divorce period.

For a free initial consultation with an experienced and compassionate DuPage County divorce lawyer, contact us online or call 630-305-0222.