I Owe My Ex-Spouse’s Debts?
Jane believed that much of the marital credit card debt would go to her husband in the divorce because the credit cards were in his name. Hold up! Let’s talk about this for a minute.
If a court orders one spouse to pay some or all of the marital debt, is the other spouse off the hook? What if the debt was only in one spouse’s name? What about the debt incurred before marriage or after the separation date? These questions come up all the time during divorce and the answers might surprise you.
Washington is a Community Property State
First of all, due to Washington’s community property law, marital debt belongs to both parties regardless of who’s name is on the account. Both property and debt are considered marital if they were acquired during the marriage by either spouse. Conversely, property and debt that were brought into the marriage or were acquired after the date of separation, are considered separate to the individual spouse as long as there was no commingling with marital property/debt.
For example, if John had a credit card in his name when he married and only used that credit for personal use during the marriage, it would likely be considered separate debt by the court and creditor. But, if John used that separate credit card to pay for household furniture for the marital home, the debt would then be considered marital debt by the court, but still separate debt by the creditor because the account was established prior to the marriage.
Creditors Don’t Care About Your Divorce Decree
Marital debt obligations will be awarded to one or more spouses in the divorce decree. And should one spouse not be able to make their payments, creditors can still come after the other spouse for community debt – regardless of whose name was on the credit documents. What? Yes!
An example might go something like this…Jane was approved for a credit card in her name while married to John. His name was not on the card. Jane used that card to buy supplies for their child’s college dorm room and purchase some clothing for herself. While this card is in Jane’s name only, the entire debt is considered marital debt in the eyes of the court and community debt by the creditor because the account was established during the marriage. Jane is awarded the debt in the divorce, but then loses her job and can’t pay her bill. The creditor can then go after John for payment because the debt obligation is not absolved through a divorce decree.
Protect Yourself During the Divorce Process
Here are some steps you can take to protect yourself during your divorce:
1) To the extent possible, pay off all loans and close all accounts incurred during the marriage. You are probably earning less on savings than you are paying to service the debt anyway.
2) If that’s not possible, require that the debt be divided and refinanced after the date of separation but before the divorce is finalized. It’s less likely to get done once the divorce is final.
3) Do not sign a Quit Claim Deed on real estate property without first having the mortgage refinanced out of your name. You do not want to end up with a big mortgage debt on an asset you no longer own.
4) Seek out the advice of a Certified Divorce Financial Analyst (CDFA®) professional who can help you understand and avoid the many common financial mistakes made in divorce.
Still Need Help?
At Integrity Divorce Solutions, our mission is to create a more efficient, affordable, and amicable divorce process. If you are struggling with the question of will “I Owe My Spouse’s Debts?” after divorce and would like to better understand the divorce process and your options, contact us today for a free consultation.