Generally speaking, a lot of attention is given to the losses associated with splitting assets during a divorce. Many a divorced spouse has bemoaned having to sell their home or share a retirement savings with an ex. It is important, however, for people to remember that they must also split up their shared debts during a divorce. How this is done may have long-term repercussions for both parties.
Credit collection and divorce decrees
As explained by The Motley Fool, the terms of a divorce decree may not be sufficient to protect one spouse from debt collection actions taken by a creditor owed money by their former spouse. If a credit card account was opened in both people’s names, one spouse may have been ordered to repay the debt as part of the divorce settlement. If, however, the account remains active, both people are still considered liable for the debt in the eyes of the creditor. Because of this, a person may be pursued for repayment even if their divorce decree stipulates their ex is supposed to pay the debt.
According to U.S. News and World Report, the same concept that applies to debt collection applies to credit reporting. Leaving a joint debt open exposes a person to having missed or late payments reported on their credit report even if their divorce decree identifies their former partner as responsible for the debt.
Closing accounts or paying off debt
Because of the issues related to allowing joint debt accounts to remain active, many couples make repaying joint debt during their divorce a priority. When this cannot be done, transferring debt to solo accounts may be a good option.