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Handling debt in a divorce

When spouses choose to divorce, steps must be taken to untangle their shared finances and financial responsibilities. In many cases, divorcing spouses are able to avoid litigation and, with the help of their respective attorneys, work out the terms related to the division of marital property and assets. In addition to ensuring assets are divided, many divorcing couples also carry considerable amounts of shared debt which must also be accounted for and divided.

The financial website recently reviewed data collected by the U.S. government related to consumer debt. As of December 2014, the average U.S. household owed approximately $155,000 in mortgage debt, more than $32,000 in student loan debt and roughly $15,600 in credit card debt for a grand total of more than $202,600.

Finances continue to be a major source of stress and conflict within many marriages and, if not handled appropriately, the same can hold true in a divorce. Even in cases where a judge intervenes in a divorce and assigns each spouse certain debts per court order, such an order is largely symbolic as a divorce decree does not bar creditors from coming after an ex-spouse whose name still appears on a home mortgage or credit card account.

For an individual going through a divorce, it's crucial to take steps to pay off or reassign all debts and close all joint accounts as soon as possible. In cases where divorcing spouses are able to identify, discuss and come to an agreement about how to handle outstanding debt and joint accounts; it's best to reassign previously shared debt to a new account held solely in the individual's name that plans to assume and pay off the debt.

Once all debts have been reassigned and joint accounts closed, individuals going through a divorce or who were recently divorced are advised to closely monitor their credit reports. Doing so can help an individual identify any forgotten accounts and also reveal if an ex-spouse has used one's social security number to open any new accounts.

Source:, "Divorce and Debt: 6 Tips For Avoiding Financial Ruin," July 19, 2011

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