Protection from the other spouse’s debt in a divorce

Protection from the other spouse’s debt in a divorce

| Oct 1, 2020 | Divorce |

Kentucky is an equitable distribution state. This means that when it comes to dividing debt in a divorce, each spouse typically (though not always) assumes the debt in his or her name alone. Handling debt this way may seem like a fair way to handle things, but it gets more complex when the debt is joint or when the court orders one spouse to pay the debt of the other.

If one spouse is ordered by the court to pay a debt jointly incurred by the parties, the order does not necessarily let the other spouse off the hook. Creditors such as banks, credit card companies and mortgage lenders are not a party to the divorce settlement and not required to adhere to it. Therefore, unless the party not assuming the debt is taken off it, he or she remains legally responsible for it.

Moreover, if one former spouse files bankruptcy including joint debts or debts of the other spouse he or she agreed to assume in the divorce, the other party may be held responsible for those debts by the creditors involved. But the person filing bankruptcy may find that the bankruptcy court will not allow the debts from the divorce to be discharged. Nevertheless, it would be prudent to close any joint accounts in order to avoid the other party incurring any additional debt. The bottom line is that each party needs to take steps to protect his or herself as much as possible.

Before agreeing to any division of joint debts or to taking on the debt of the other party, it would be a good idea to carefully consider the consequences of such an action. It may be possible to handle separating debts prior to the divorce. In any case, it would most likely help to go through all of the financial matters from the marriage with a knowledgeable Kentucky family law attorney who can provide information regarding the party’s rights and legal options on this and other important matters.