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The Impact of Dividing Debts at Divorce

Allison Gerli • Sep 22, 2020

What Happens To Debt After Divorce? Who is Responsible? What You Need To Know.


You and your spouse may have accumulated debts of various types during the course of your marriage. If so, you are probably concerned about how to divide those debts and what the consequences will be if the debts are not paid, particularly if you do not trust that your spouse will be responsible about making payments.

 If a debt was undertaken by you and your spouse jointly (generally the case for home mortgage and car loans, and often the case for credit cards), you and your spouse probably are jointly and severally liable for payment of that debt. This means that the creditor can pursue either or both of you to obtain payment.  

The creditor (bank, mortgage company, department store, credit card company, etc.) is not a party to your dissolution of marriage proceeding. In the divorce settlement, the debts will be allocated between you and your spouse by agreement or, if you have a trial, the Judge will order who is responsible for each debt.  

Despite the allocation of debt in a divorce judgment, debts in joint names will remain in joint names, unless the person the debt is allocated removes the other party from responsibility. The creditor is not bound by any agreements reached between the two of you as to who is responsible post-divorce, nor is it bound by a court order as to who is responsible for the debt. A creditor can still pursue either you or your spouse for an unpaid debt, regardless of who the court designates to pay the debt.

As a result, it is important to understand that, even when a court specifically orders that one party is solely responsible for payment of a home mortgage or other loan or other debt, if both parties’ names remain on the loan or debt, both parties remain responsible for its payment.  Transfer of the title of your home by quitclaim or other deed does not in any way alter your obligation under an existing mortgage loan.  

The divorce judgment may include an indemnification and hold harmless clause. Typically, these provisions are used so that a party who agrees or is ordered to pay a certain debt is responsible for reimbursing the other party if the other party ends up paying the debt instead. Although these clauses do provide you with recourse through the courts should your former spouse fail to pay a debt, as a practical matter, if the creditor has been unable to collect form your former spouse, your chances of doing so are not much better. Your goal should be to reduce the risk of problems related to the marital debt post-divorce.

What To Consider When Settling Your Case

If you are hoping to settle your case, it is important to consider your spouse’s likelihood to responsibly pay the debt that is allocated in the settlement. The spouse’s failure to pay, or failure to pay on time, can affect your credit rating and of course impact you in other ways.

 Sometimes parties agree to delay selling or refinancing the house for a period of years so that one of the spouses can remain in it after the divorce. Often that spouse is not able to qualify to refinance at the time of divorce. If you are the non-resident spouse and you are considering this option, you need to consider what this could mean if you want to purchase a residence or take on some other large debt before the time for your spouse to refinance or sell the home arrives. The obligation on the mortgage may result in your being denied credit, even if your spouse is paying the mortgage on time. This is something that we may need to discuss as settlement options are generated.

It may be important for both spouses to obtain credit reports to ensure all debt is being disclosed and addressed as part of the divorce process. This is something that can be requested of both parties to a divorce. 

Please discuss your current debt situation with your attorney so that the appropriate measures such as closing accounts may be taken to protect your credit rating and preserve martial assets. You need to be aware of all outstanding debts when preparing settlement options or proposing how property and debt will be divided at trial.   

If you have questions or concerns about your situation, the attorneys at The Center for Family Law are here to help.  

02 Jan, 2024
Ready to start anew but feeling lost? Look no further than the Second Saturday Divorce Workshop, hosted by The Center for Family Law. This workshop will offer tools and resources for every step of the process, providing guidance on important topics such as child custody, support, and property division. Register for second Saturday 2024 now!
17 Nov, 2023
Once again, The Center for Family Law has been ranked as a 2024 "Best Law Firm" by U.S. News & World Reports in the area of family law in St. Louis.
By Allison Gerli 21 Aug, 2023
Navigating family law can be a complex and daunting process. That's why the recent Missouri Bar Family Law Conference brought together Missouri attorneys in the field to share insights and best practices. Attorneys at The Center for Family Law were among the presenters and in attendance at the 23rd annual conference held in Branson, Missouri. Their presentations focused on managing client expectations, initial consultation, drafting documents, case management, and grandparent visitation, third-party custody, and guardianships. Initial Consultation & Managing Client Expectations To ensure a positive attorney-client relationship, it is crucial to establish clear expectations from the very beginning. This was the focus of Allison Gerli's presentation at the conference. Allison co-presented with Andrea Pate, a family law attorney and partner at The Law Office of the Ozarks. It is crucial for attorneys to establish a solid foundation of trust and communication with their clients from day one, as this sets the tone for the entire legal process. Allison stressed the significance of active listening and open dialogue during these initial meetings, allowing clients to express their concerns and goals. Allison's presentation also highlighted the importance of transparency in managing client expectations. Attorneys should provide honest assessments of their clients' cases, outlining both the strengths and potential challenges they may face. By setting realistic expectations from the outset, attorneys can help clients navigate the legal process with confidence and a clear understanding of what lies ahead. The presentation then shifted to the importance of talking to clients about process options. Often practitioners focus on the substance and overlook the process. Clients have options on how to resolve their disputes and this should be presented and supported by practitioners. The Center for Family Law prides itself on process options and educating clients on their options, whether that by an uncontested "kitchen table" style divorce, collaborative divorce process, mediation, or a semi-litigated case resolved through cooperative attorneys sitting down to work through issues. Case Management Case management is critical to providing quality services to family law clients. Ann Bauer's presentation at the conference provided valuable insights and best practices in this area. Ann co-presented with Kristen Siegel, a family law attorney and partner at Siegal & Irwin, LLC based in Lee’s Summit, Missouri. Kristin covered the importance of carefully drafting court pleadings. In terms of case management, Ann highlighted the importance of document organization, keeping track of deadlines, and timely communication with clients. Attorneys must keep track of deadlines, court appearances, and client meetings to ensure cases progress smoothly. Clear and frequent communication with clients is crucial. Clients want to know what is going on, and not to be left wondering. It is important to provide updates, address concerns, and gather necessary information for the client’s case. Ann also discussed the significance of effective document management as a part of case management. Maintaining well-organized and easily accessible files can streamline the legal process and ensure important documents and information are readily available. F.amily law cases are often document-heavy. Keeping documents organized in a systematic way can enable the attorney to prepare for settlement and trial Grandparent Visitation, Third-Party Custody, and Guardianships Hallie Van Duren delivered a two-part presentation on the complex legal issues surrounding grandparent visitation rights, third-party custody, and guardianships. Hallie co-presented with attorney Kristen Sparks, partner at Garnholz Sparks. Typically, guardianship cases involve neglect, abuse, or the inability of the biological parents to provide a suitable environment for a child. A guardian who is appointed by the Court steps into the role of a parent in all respects. A third-party custody action can similarly result in a third-party custodian stepping completely into the role of a parent, but, unlike in guardianship cases, third-party custody can in some circumstances result in a shared custody arrangement between biological parents and non-parents. Grandparent visitation involves much more limited court-ordered contact between a grandparent and a child or children while preserving the parental right to custody. Hallie outlined the legal standards and procedures for a non-parent to seek custody or visitation of a child in each of these types of cases, emphasizing the paramount concern of establishing and preserving the child's best interests. By exploring statutes, caselaw, and examples, Hallie’s presentation analyzed which type of action would be most appropriate in different circumstances. Over the course of her two-hour presentation, Hallie examined the complex legal balance of preserving relationships between children and grandparents or other third parties while respecting parental rights. Hallie offered practical guidance for Missouri attorneys in advising clients who are either seeking to establish grandparent visitation rights, guardianship, or third-party-custody or defend against such actions.
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