Myths About Divorce Decrees & Debts! What to Watch Out For!!!

Myth 1: A divorce decree protects my credit if my ex-spouse doesn't pay the debts they were assigned in the divorce.
Fact: If you have a joint financial obligation with your ex-spouse, and your divorce decree states that your ex-spouse is responsible, and your ex-spouse is delinquent on paying, your credit as well as his is affected. As stated above, your legal responsibility for a debt does not go away because a divorce decree assigns responsibility for a debt to your ex-spouse. Along with a legal responsibility to pay comes the right of the creditor to report a debt delinquent on your credit report if it is not paid as agreed in the original contract. Period.

Especially tragic are situations where one ex-spouse files bankruptcy and includes many joint debts in the BK. The spouse not filing bankruptcy is left holding the bag for these joint debts, and many times is not notified of the ex-spouse's filing until months or years down the road when it is too late to correct the situation. So not only is the spouse who didn't file BK responsible for the unpaid debts (and can be legally sued for them), but the non-filing BK spouse's credit also is ruined - something that cannot be corrected - because the credit bureaus have the right to report them delinquent.

Myth 2: A divorce decree can relieve a spouse from financial obligations of joint debts.
Fact: Debts that were obtained in the name of both spouses before a divorce (meaning both the husband and wife signed a document or application saying that they were both responsible for the debt) remain the obligation of both parties after a divorce, no matter what a divorce decree says.
Why? Because both of you signed a legally binding contract with the creditor, and the divorce decree does not amend this contract. Amendment of any contract requires agreement by all parties (including the creditor). Proof of the amendment requires the signature of all parties. During a divorce, the creditors are not even consulted, let alone a part of the divorce courts, and therefore the original agreements/contracts stand. Consequently, if your ex-spouse does not pay a debt that he was assigned in a divorce decree, then you are responsible for it.