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Why Can’t Divorce Split Loans?

What You can Do


When a marriage ends, people split up assets and liabilities and go their separate ways. What happens to loans during divorce? Are they assigned to one spouse, just like a car or other asset? It’s more complicated than that, and divorcees are often surprised by loans from the past.

Divorce and Loans

Divorce agreements may say who is responsible for a loan. However, they don’t say who will actually pay the debt and whose credit is on the line. To be more precise, you might say divorce agreements specify who is supposed to pay the loan. That person may or may not actually follow through.

The divorce agreement is separate from any loan agreement you’ve signed. Unfortunately, loans are not changed in any way when you get divorced -- even if one person becomes responsible for a loan that was originally applied for jointly (by both spouses). Yes, one person is responsible for the loan in the court’s opinion, but not in the lender’s opinion.

Lenders approved the loan assuming that both spouses would repay. They evaluated the loan by looking at the combination of each spouse’s income, with the idea that both incomes would be available to help repay the loan. They also looked at each spouse’s credit, and one person’s good credit may have helped win the loan (so the lender certainly doesn’t want to let that person off the hook).

Therefore, lenders will hold both of you accountable whether or not you’re married.

You’re off the Hook?

If your former spouse is responsible for repaying loans that have your name on them (even as a joint borrower), make sure it actually happens. Your lenders most likely don’t even know that you got divorced, and unfortunately they are not sympathetic to personal struggles. They’re expecting you to take responsibility for the loan.

Changing your address, changing your name, and even notifying lenders of your divorce (and the details of your agreement) will not get you off the hook for a loan. Lenders will continue to report loan activity to credit bureaus, and any missed payments can hurt your credit.

Even though you’re not responsible for the “debt” (you, your former spouse, and the lawyers all agreed to it), you’re still responsible for the “loan” or the “account” in question. Your former spouse may face legal trouble for failing to pay off debt, but you face financial trouble if your credit report is tarnished (even temporarily).

There are only two ways to keep your credit safe:
  • Get your name off the loan (read about options for debt in divorce)
  • Make sure the lender gets paid
If your former spouse doesn’t pay debts as agreed, talk to your attorney as soon as possible. You may want to consider making the payments yourself (even though it’s not your responsibility) just to keep your credit in good shape. You may or may not be able to settle up later with your former spouse -- again, a local attorney’s input is crucial here.

Make sure you have a way to keep track of loans after your divorce. Get online access to accounts, and make sure lenders have a way to send mail to you (whether it’s your new residence, a Post Office box, or another arrangement). You’ll need to monitor your accounts regularly, and it’s essential that you get important correspondence from your lender -- especially if payments are missed.

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