In our last post, we spoke about property division, the default rules employed by different states in dividing property, and how marital agreements—when properly drafted and executed—can trump state laws governing property division. One of the areas where couples can get particularly hung up is with joint accounts.
One example of this is with co-signed loans. The bank is able to hold both the primary borrower and the co-signer responsible for the balance, despite whatever agreements the couple may have between themselves, even when a court order is involved. When an uncooperative spouse fails to pay on the loan, the co-signing spouse may end up having their credit score destroyed as a result.
Ideally, spouses with joint accounts will take steps to close those accounts and establish separate accounts for themselves in order to separate themselves financially. To do this, spouses have to be open to the possibility of negotiating an arrangement as to who is responsible for the debt. Divorcing spouses aren’t always willing to work together. Even when they are, it isn’t always possible to separate financially, particularly with joint mortgages and other large debts.
For spouses going through the property division process, the important thing to remember is that a settlement agreement or court order doesn’t prevent a debtor from going after any party that is technically liable. Parties to a divorce may hold their spouse responsible for a settlement agreement or court order as to a contract, but it doesn’t prevent them from having to deal directly with the lender.