Protecting Your Rights: 5 Facts About Marital Debt

Posted by Steven D. Eversole | Mar 15, 2014 | 0 Comments

From your first day of marriage, you and your spouse will be accumulating assets—and debts—that will become part of your mutually owned marital property. Any credit card debts, mortgages, medical bills and other loans will become marital property and divided during the marriage settlement. When entering marriage, and when considering your divorce options, many spouses fail to consider the debts that may have accrued in their partner's name.

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When facing divorce, there are a number of traps for the unwary and marital debts is one of them. You should take the time to review your individual circumstances with an experienced advocate who can protect your rights. OurBirmingham divorce attorneys understand the complex financial scenarios faced by our clients. We will take the time to review your individual financial status, including your marital debts and assets, and pursue every opportunity to protect your financial interests before, during, and after divorce.

Consider the following important 5 facts about marital debt in Alabama:

You can be held liable for unpaid spousal debts. If you signed a loan for a car or mortgage, you will be held responsible for those debts. Creditors cannot take legal action against an ex who has not signed the loan agreement. This means that even if the debt is split during a divorce settlement, you can still be held accountable for debts that go unpaid if they are in your name. No divorce decree will release you from loan obligations.

Splitting marital debt is more complicated than splitting assets. Since creditors can pursue either party who has signed the contract, it is much easier to split assets than debts. Any unpaid debts can still follow both parties after a divorce is finalized. For this reason, it is best to pay off as much debt as possible before filing for divorce.

Alabama is an equitable distribution state. In the state of Alabama, debts and assets will be divided “equitably” between the parties. Keep in mind that “equitable” does not mean equal. Fortunately, in equitable property states, you cannot be held accountable for debts you were unaware of. Regardless, both parties should fully disclose any assets and debts at the time of divorce settlement. Parties should list all assets, account numbers, debts owed, and agree on who will pay off debts.

An indeminty clause may benefit your settlement. An indemnity clause included in your divorce settlement will allow you to take your ex to court if he or she fails to pay off debts or for going into default on any shared debts. This is important to protect your credit score after your marriage is finalized.

Your name can be removed through refinancing. If you have your name on a loan document, you should not give up title until the loan has been refinanced. Through refinancing, you can get your name removed from the loan to protect you from being held liable for any default.
Every situation is unique and should be reviewed by an experienced advocate. The bottom-line is that you could be held liable for marital debts, even after a divorce settlement has assigned those debts to your former spouse. It is important to have a clear understanding of your rights and interests before signing any divorce settlement agreement.

If you are seeking a divorce in Birmingham, contact Family Law Attorney Steven Eversole at (866) 831-5292.

About the Author

Steven D. Eversole

J.D., Samford University's Cumberland School of Law, Birmingham, Alabama B.A., University of Alabama, Tuscaloosa, Alabama

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