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Dividing Debt in Divorce

CCCS provides tips for consumers about protecting their finances during divorce

There is evidence that couples' financial problems are linked to increased levels of stress, conflict, and marital duress, as well as decreased levels of marital satisfaction (Sanchez and Gager, 2000), which clarifies the reason why financial problems are frequently cited as a major reason for divorce. Ironically, the financial problems that result from divorce may be even more severe. While it may be hard for people involved in an emotionally draining divorce to clearly think about their money, it is imperative they do. One of the most pressing concerns of newly divorced people is determining who is responsible for the repayment of debt.

According to Consumer Credit Counseling Services of the East Bay, a division of Money Management International (MMI), the first financial action after separation is to pull a copy of your credit report. You will want to review entries carefully and either close joint accounts or change them to individual accounts. Alert your secured lenders of your marital status and instruct them not to allow any changes without your permission. You may also want to "freeze" joint bank accounts or divide any funds into two individual bank accounts.

As preparation for the divorce, you and your spouse need to reach an asset settlement to be presented in court. This settlement agreement outlines how your debts and assets will be divided; it also includes plans for spousal and child support.

"To avoid future problems, it makes sense to develop a plan to pay off your debts prior to your divorce," said Shirley Dean, education and community relations director for CCCS of the East Bay. "Remember, your divorce decree is an agreement between you and your spouse (not your creditors) on how your debts and assets will be divided. The contracts you signed with your creditors cannot be changed by the divorce decree. Whoever signed the original contract with the creditor will still be obligated to pay the debt after the divorce."

As protection, your divorce agreement can include a clause stating that if the assigned debts are not repaid, you would be entitled to indemnification. After the fact, your only recourse may be to file contempt of court charges for failure to abide by the terms of the divorce decree. Keep in mind that still would not relieve you of your obligation on the debts.

Because divorce can be a very complex process, consider hiring a trusted financial advisor for help; be certain to ask about your advisor's experience with divorce situations.


About Consumer Credit Counseling Services
Consumer Credit Counseling Services (CCCS) is a non-profit, full-service credit-counseling agency, providing confidential financial guidance, counseling and debt management assistance to consumers for more than 47 years. CCCS helps consumers trim their expenses, develop a spending plan and repay debts. Counseling is available by appointment in branch offices and 24/7 by telephone and Internet. Services are available in English or Spanish. To learn more, call 800-762-2271 or visit their Web site at



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