Posts Tagged ‘Settlement’

Some Financial Effects of Divorce

Tuesday, May 1st, 2012

When two people are dating, they often decide to move in together for a number of reasons, and one of those reasons can be financial.  After all, why pay for two sets of living expenses (rent, electric, cable etc.) when you are spending all of your time together?  It is cheaper to combine expenses.

The opposite happens when people get divorced, but for some reason it seems to come as a surprise to people that they are not able to continue to maintain the same lifestyle that they had as a couple.

Often, the couple’s financial difficulties are one of the reasons they got into marital problems in the first place, and now that same combined income needs to pay for two separate households.

Everyone seems to understand that the ‘stuff’ to be divided at the time of a divorce includes the house, the cars, the televisions and the other tangible items.  What they often don’t understand is that debts are also considered marital ‘stuff’ that will be divided.  Debts are contracts made between parties where one side (the creditor) agrees to provide something (money) in exchange for the other side’s agreement to pay the creditor back, usually with interest.

Most of the time, the divorce will assign the debt to the person who signed this debt contract as the ‘responsible party’ for the debt.  For example, if Bob gets a credit card in his name alone, he is the ‘responsible party’ for that debt and he will probably be assigned that debt in the divorce.

If the debt is in both of their names, the divorce may assign the debt to one party, but the contract with the creditor has never been changed.  What this means is that the creditor can still file a lawsuit against both Husband and Wife to try to get repayment of the debt.

As an example, Bob and Carol were married when they applied for a credit card to cover the cost of furniture for their home and they both signed the credit card contract.  Now, Bob and Carol are divorced and that debt has been assigned by the divorce to Bob.  Bob does not make the payments on the credit card and the credit card company sues both Bob and his ex-wife Carol for repayment.  Carol will need to defend herself against that lawsuit in court so that the court can order that Carol is not to be held responsible for this particular debt.  Carol can do this herself, but she will probably hire an attorney to assist her.  If the divorce decree is worded correctly, Carol can then file suit against Bob to have him reimburse her for her legal fees.

There are also times when one or both of the parties files for protection under the Bankruptcy Code.  Again, a careful drafting of the divorce decree can help protect the other party from being held responsible for a debt that has been discharged by the other ex-spouse.

Divorce is an emotional and difficult process that can have immense and varied financial implications that should be discussed with an attorney who can help provide you the assistance and protection you need.

If you have any questions about this or any other legal subject, please feel free to give us a call at 757-234-4650 or visit our website at http://www.BeaversLaw.com.