• Discounts and special offers
  • Subscriber-only articles and interviews
  • Breaking news and trending topics

Already a subscriber?

By signing up, you accept Moneywise's Terms of Use, Subscription Agreement, and Privacy Policy.

Not interested ?

What is a divorce decree?

In a divorce, most couples will have to evenly divide their marital assets. But what about debts?

Ideally, individuals would walk away from the marriage shouldering the responsibility for any debts incurred in their own names. But as most people going through a divorce know, things don’t always work out according to plan.

How your debt will be divided should be laid out in a divorce decree. A divorce decree is your judge-approved settlement agreement. It is a court order that officially details how you and your ex will deal with things like your home, parenting concerns and spouse support, as well as any investments, bank accounts and debts.

More: How to file taxes after divorce

Marital debt

Marital debt refers to any debt that was incurred during the marriage.

Regardless of who was making the payments during your marriage, you’ll generally both be responsible for any debt that was accumulated on a joint credit card while you were still together.

Kiss Your Credit Card Debt Goodbye

Millions of Americans are struggling to crawl out of debt in the face of record-high interest rates. A personal loan offers lower interest rates and fixed payments, making it a smart choice to consolidate high-interest credit card debt. It helps save money, simplifies payments, and accelerates debt payoff. Credible is a free online service that shows you the best lending options to pay off your credit card debt fast — and save a ton in interest.

Explore better rates

Community property laws and divorce

A handful of states have community property laws. That means that anything acquired over the course of your marriage is equally shared by both parties — and that includes your debts.

Under community property laws, the only things that would be considered separate property is property held in only one spouse’s name, including anything they owned before marriage, were given as a gift or inherited.

Community property states

There are nine states that have community property laws. They are:

  • Arizona
  • California
  • Idaho
  • Louisiana
  • Nevada
  • New Mexico
  • Texas
  • Washington
  • Wisconsin

All other states tackle divorce from an equitable distribution perspective, meaning if you can’t settle who gets what, a judge will step in and use their discretion to split things fairly.

Different types of debt are handled differently, but a good rule of thumb would be to assume that any debt in your name will be allocated to you.

Mortgages work a little differently and can be challenging if one party isn’t able to buy the other party out. Your best option here would be to sell the house and split the proceeds.

As for medical debt, community property laws will split that 50/50. Equitable division laws will factor in whether you were living together at the time the debt was acquired and whether the court’s decision will impact your children.

Divorce and debt responsibility

Regardless of how the legal system in your state handles debt in divorce, if your name is on a debt, the bank will still view you as responsible for it.

From the bank or credit card company’s perspective, legally, credit card agreements or loan contracts will supersede a divorce decree.

Things can get a little complicated when one ex-spouse has been ordered to make debt payments on a loan that isn’t in their name or held jointly.

Based on how property is divided, it may be up to your former spouse to make payments on a car loan that was taken out in your name. But if they refuse to make those payments, it’s your credit score that will be affected.

You can bring them to court to take action against them, but in the time it takes to get your complaint before a judge, your credit will probably already be in the toilet.

And it’ll be reflected in your credit report for years to come.

If most of your joint bills are in your name, you may consider including an indemnity clause in your divorce agreement, which essentially outlines who is responsible for the debt and protects the other party from having to pay it.

An indemnity clause will also ensure you can sue your former spouse if they fail to pay their court-ordered debts in the future.

Discover the power of FreeCash – your ticket to easy money

Dive into a world of rewards at FreeCash where earning cash is as simple as a click. No gimmicks, just real cash for your time. Join the community of earners today and watch your wallet grow effortlessly.

Make Money Now

How to handle the divorce bills

Your best bet is to try to pay off any debts before your divorce is finalized.

Of course, that’s not always possible. So in that case, make sure all your joint accounts are closed so you don’t get dinged for any of your former partner’s post-divorce purchases.

If your former spouse can’t manage the debts they were assigned in the divorce settlement, you may find creditors coming after you to make payments.

Your best option here is to pay off the debt if you can afford to, keep a record of it and notify family court to ask for assistance getting reimbursed from your ex. That way, you avoid getting your credit score in a bad spot while you wait for things to move through the court.

It doesn’t seem fair. It probably isn’t.

But that’s why you should try to liquidate as many assets as possible when you get divorced. Pay off as many joint debts as possible and close your joint accounts.

Sometimes walking away with nothing is better than dealing with a damaged credit score and creditors hounding you.

Sponsored

This 2 Minute Move Could Knock $500/Year off Your Car Insurance in 2024

Saving money on car insurance with BestMoney is a simple way to reduce your expenses. You’ll often get the same, or even better, insurance for less than what you’re paying right now.

There’s no reason not to at least try this free service. Check out BestMoney today, and take a turn in the right direction.

Sigrid Forberg Associate Editor

Sigrid’s is Moneywise.com's associate editor, and she has also worked as a reporter and staff writer on the Moneywise team.

Disclaimer

The content provided on Moneywise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter.