This is a very important issue in every dissolution. First, make sure that you and your spouse get current copies of your credit reports. You may obtain all three credit bureau reports (Experian, Equifax and TransUnion) at no cost once a year at www.annualcreditreport.com (quickest to download), or by phoning 1-877-322-8228. They will be sent in two weeks by mail.
If you are in mediation, ask the mediator to have you exchange copies with your spouse since you each will have different reports. You must see what is on all reports. If you have separate attorneys, ask your attorney to stipulate to an exchange of the reports, or else you will need to subpoena them from your spouse. If you don’t see what is on those reports, it may cause many credit problems after the divorce..
Once you review all reports, you will need to meet with your attorney/mediator or your lawyers to determine how the debts on the reports will be divided. The debts incurred during the marriage are joint debts. The debts created before marriage, or after the date of separation, should be determined to be separate debts, and it should be clarified which spouse is responsible for each debt.
Many marital debts arise from a contract that you both signed (for example, a mortgage, an auto loan, or joint credit cards). While you are separated, your spouse may incur new debts before you are divorced. Remember that even if you divide joint debts, a lender will hold you responsible if your spouse doesn’t pay because you signed the agreement as well. If you are careful by clearly establishing in writing which party will assume which debts, you should be able to protect yourself.
Your Separation Agreement and Marital Settlement Agreement, Stipulation, or Judgment must clearly define how you are dividing the debts, and specify the debt (include at the least the last five digits of the account and the name of the creditor). Also, state in writing that the spouse taking such debts is assuming the debts as his or her “sole and separate property,” that each spouse will be responsible only for those debts assigned, and that each spouse shall “hold the other harmless” for any liability for those debts.
In California, under Family Code §916, following dissolution of a marriage a non-debtor spouse is only liable for debts incurred by the former spouse during their marriage if the debt is assigned to the non-debtor spouse by the judgment of dissolution. Spouses in California are protected under Family Code §916 once a marriage is dissolved and the division of community property is explicit. Thereafter, if a dissolution judgment does not assign you a particular debt, and a debt collector attempts to collect that debt assumed by your former spouse, you must notify the debt collector in writing and provide a copy of that portion of your judgment that relieves you of any liability for the debt. That debt collector should cease to attempt any further collection, and if he or she continues pursuit, he or she may be in violation of the Fair Debt Collection Practices Act.
Mari Frank is an Orange County divorce attorney, mediator, collaborative lawyer and Certified Privacy Professional. She teaches negotiation and mediation at the University of California in Irvine and is a Certified Trainer of lawyers for the State Bar of California.