June '02 - 'Till debt do us part

If you are like most of us, you probably have a significant amount of joint debt with your ex.  And just as we have to divide our assets in a divorce, so do we have to divide our debts.  Sometimes this is easy.  If he wants to keep those @#^%$& #   golf clubs he just "had to have", then he can be responsible for the credit card that paid for them.  And if she needed more outfits than she could wear in a year, then she can keep the JC Penny card that fed her habit. 

So how does dividing debt work from a legal point of view?  Pretty simply, actually.  A good divorce agreement will have a standard indemnification clause.  This states that the spouse who assumes the liability for a joint debt will also agree to indemnify the other one in the event he doesn't pay it.  For example, let's say the husband agrees to be responsible for the Visa card after the divorce.  The divorce agreement will state that he will indemnify her in the event he defaults on the debt and the credit card company tries to go after her to collect it.  This means he will step forward, claim responsibility for this debt, pay it off including interest and late charges, and then reimburse her for any legal fees she incurred in defending this claim.  It sounds good on paper, doesn't it?  Well guess what?  If he could have paid off the debt in the first place he probably would have.  So trying to enforce this provision is pretty difficult if not impossible. 

And what do you care if Visa gets their money or not?  Well, his deadbeatedness is going to show up on your credit report.  Regardless of who gets what debt in the divorce settlement, you have to keep in mind that the lender doesn't care.  They lent you both the money and as long as you are both alive they will continue to haunt you both until the bill is paid in full. 

And once the debt is delinquent, there is not a lot you can do.  You can sue him for contempt but that is not going to help your credit now.  You can send an explanation and a copy of the divorce decree to Capital One Bank, but their "We don't give damn" file is already overflowing.  You can complain to your lawyer but now you just paid $150.00 to vent, only to have him shake his head and say "That reminds me.  About your retainer . . . . ."

It is therefore best to address this issue up front by either paying the joint debt off or transferring it into his name alone.  One good way is to make him take out a new credit card in his own name and transfer the balance of the joint debt onto this new card.  If that is not possible, another option would be to pay the debt off from the equity in your house.  If you are selling your house, insist that the joint debts be paid off from the top of the proceeds.  If you are buying him out, pay off the joint debt from what you would otherwise owe him. 

Regardless of how you do it, it will bring you great peace of mind to know that you and your credit report are not hanging in the wind as you wait for him to pay off that debt.