We’re Getting Divorced, But We Have Debts to Pay
Posted in Divorce on May 5, 2018
A couple getting divorced should make sure that the debts they have will get paid. Frequently, they informally agree who will pay which one. That agreement can be formalized in writing and made part of the divorce, but, under Pennsylvania law, it is not required to be. (Pennsylvania is different from most other states in that regard.)
If an agreement is prepared and signed by the parties and, later, one party fails to pay a debt that party agreed to pay, what happens? First of all, the names of the parties on that account will suffer damage to credit and that damage may be unavoidable and difficult to correct without having the agreement prepared by a lawyer and made part of the divorce documents. But, if your credit is already damaged, that would not likely make it any worse.
More importantly, if there is enough money involved, the company or person to whom the money is owed can take action against both of you even if you have an agreement as part of your divorce stating just one of you must pay that debt or even if only one name was on the account. Why? Because an agreement between the divorcing couple does not change the duty they both still have to pay the debt and because you were married, you are responsible for one another’s debts. That said, as a practical matter after the divorce is final action is likely to be taken only against the one ex-spouse whose name is on the account because most creditors cannot think “outside of the box”.
So, what does happen if your ex fails to pay a debt your spouse agreed to pay and you have a proper agreement? Well, as pointed out above, you would have to pay. The agreement gives you the right to take action against your ex to collect what you paid out on your ex’s behalf. Isn’t that nice…. You get to hire a lawyer and sue your ex who probably has no money to pay you (or your ex likely would have paid the debt).
This is not very satisfying, so it may make sense to have a properly prepared agreement only for large debts. Of course, even then, if your spouse does not have the money (or assets you could sell), suing would be a waste of time and money. I often tell clients that an agreement to pay debts is worthwhile if the ex is the kind of person who thinks he or she will go to hell if the debt is not promptly paid.
One thing that I have found out over the years that can make a formal agreement valuable is that if you need to borrow money or seek credit for a card or loan, if the party from whom you seek credit sees that you have an agreement requiring your ex to pay a debt, especially a large one like a mortgage, your request is much more likely to be approved.
I offer agreements for all aspects of settling your case, but it is always better to actually do things than to agree to do them in the future. An agreement covers things which cannot be resolved before the divorce is over. It is a fact that only about 1% of my clients have agreements prepared. I can discuss your particular situation with you, 1-800-486-4070, M-F, noon to 3 PM, at no charge.