What Happens to Debt When You Get Divorced?
When couples divorce, who gets stuck with the debts run up during the marriage? Just as assets are shared in marriage, debts may be as well, so it has to be determined which party should be responsible for what debts. Sometimes, even if your spouse was the one who incurred the debt, you may still have to pay it; and creditors may be 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 debt is a major issue for people going through a divorce. We can provide professional guidance to examine your situation and develop 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. Illinois is an equitable distribution state, 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 is related to fairness, so you may have to pay a debt that your spouse is not able to because it will cause you less hardship. Also, some spouses may wind up with more debt and receive other marital assets to make things more equitable.
Even if a debt may be assigned to your ex-spouse, you may still wind up responsible. In Illinois, creditors are not required to follow the judge’s orders, so should your ex stop making payments on joint debt, creditors can try to collect from you. Even if your divorce agreement has provisions to force your ex to pay, going to court to enforce them is expensive.
Exceptions to the rule
There are certain types of debt that must be handled in more specific ways, including:
- Credit Card Debt — In Illinois, purchases made on a card that is in the name of only one spouse will be considered marital debt if it can be shown that the couple or family benefited from them, rather than only one spouse.
If the credit card is in both spouses’ names, the debt will likely be divided equitably. If it is in only one spouse’s name or if one of you is just an additional cardholder on the spouse’s credit card, then it will be assigned to that spouse. This is because cardholders are contractually obligated to the company, regardless of who gets assigned to pay that debt; a divorce decree is irrelevant with regard to the creditor’s right to be paid.
- Student Loan Debt — Only one person receives direct benefit from student loans — the ability to earn a degree that might advance their career. However, often both spouses may benefit if the spouse’s career takes off due to the degree, so it will sometimes be held that it is appropriate to divide the student loan payments. Courts will consider factors such as earning potential, length of the marriage, and standard of living; and even if one spouse must pay the loan, this will likely be taken into account when dealing with issues such as spousal and child support.
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. Make sure your credit status is good and that your spouse hasn’t run up debt and loans without your knowledge. Consider getting 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 transfer joint debt onto new cards in each person’s name and cancel the joint cards. 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, 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 court recording 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, when debt on credit cards becomes the responsibility of the spouse who made the purchases.
- If your debt is overwhelming, you might be able to use joint savings or take a home equity line of credit on 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.
Get Help – Contact Us For a Free Consultation
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 our offices today.