Resolving Differences By Putting You And Your Family First

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Resolving Differences By Putting You And Your Family First

Personal Liability on Debts During a Divorce

Who is Liable for What?

It is important for you to understand the concept of personal liability on debts, which is almost certain to be important in the resolution of your divorce. Your goal will be to put yourself into the most protected position possible with regard to unpaid liabilities existing as of the time of your divorce. You are personally liable for every promissory note which you signed, even if the loan proceeds were received by another person or a business entity. You are personally liable for all charges made on a credit card account you established, even if all the charges on the card were made by your spouse or some other person for entity. You are personally liable for all unpaid income taxes associated with tax returns you have filed. You are personally liable for the outstanding mortgage on your residence (assuming you signed the mortgage note), even if your spouse if awarded the residence. You are personally liable for all charges incurred at your country club, even if they were made by other people. You are personally liable for the debt outstanding on the car awarded to your spouse, if you signed the car note or the car lease. The bottom line of personal liability is that if you have it, you need to address it at time of divorce. Even though there is not such a thing, per se, as community debt, either you owe the money, or your spouse owes the money, or you are both personally liable on the debt. The court will take the outstanding debts incurred during marriage into consideration in the division of the community property. Your best option is to assume all the debts for which you are personally liable, as you may receive off-setting assets to cover the negative amount of the debt. That way, you will be in control of payment, so you can protect your credit. It might feel good to think you can stick your spouse with that big Mastercard bill, but unless your spouse pays it, Mastercard will sue you – not your spouse – for the money. To use a simple example, let’s say you have $50,000 in a checking account and $10,000 is owed on your Mastercard bill. If the property is divided 50-50, you would receive $35,000 of the cash in the checking account and the obligation to pay the amount due to Mastercard. You and your spouse would thus end up with a net of $15,000 each, and you would be in control of when to pay the Mastercard bill.