Divorce causes many financial worries – dividing property, determining spousal support, and legal costs among them. But it’s important to remember that debts are not only included in divorce but are also divided differently, and often follow you even after the divorce is finalized. 

Creditors only care about the agreement you signed

The most important thing to remember when it comes to debt and divorce is: whatever agreement you create to divide assets and debts in your divorce makes no difference to the credit card company or the bank that holds your mortgage. If your name is on a loan along with your spouse, you are jointly responsible  regardless of the divorce. This means that, even if one spouse agrees to take on the debt, the other will still be on the hook until the loan is repaid. 

How do I protect my credit?

There are several ways to ensure you are not penalized for debts a former spouse is expected to pay, including refinancing and liquidating the assets attached to a loan. 

Remove your name by refinancing

If one spouse is taking possession of a house or car in the divorce, your instinct may be to simply remove your name from the title and be done with it. But, this does you no good if your name is still on the financing agreement. Instead, the person who gets the house or car in the divorce needs to refinance the loan in their name. This can be challenging for higher value loans that were based on two incomes, but can help remove uncertainty about who is responsible for payment.

Sell assets to get a clean slate

A more extreme option is to sell the asset you owe money for, pay back the loan and part ways. This way everyone can move on and neither person needs to continue worrying about debts that might be in their name. However, if an asset has lost value or timing is an issue it may not be a viable option. It’s best to talk to an expert before proceeding with this option. 

In any case, it is important to keep tabs on debts shared during the marriage. Assuming a loan is being paid simply because your ex-partner holds that asset can lead to issues down the road if they fail to pay.