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What happens if your ex declares bankruptcy?

You end your marriage to your spouse, and your debt gets divided during the divorce. Some of it is credit card debt, some of it is payments on the car and some is mortgage debt.

Things go well for the first few months after the divorce. Your ex pays their debts and you pay yours. It seems like the financial side of the agreement has worked out.

Then your ex decides to declare bankruptcy. Suddenly, you start worrying about what it means for you. Could those lenders start coming to you to get payments when it becomes clear that your ex is not going to pay?

Eliminating debt or splitting debt

One thing you must understand is that divorce is about splitting debt, rather than eliminating it. That debt still exists. In many cases, it is debt that you agreed to pay.

For instance, when you got those credit cards, you both agreed to pay off the balance. You signed it as a couple and, in your mind, you thought that you both agreed to pay as a couple.

The credit card lender, however, looks at it as if two individuals have both agreed to pay whatever they owe. It does not even matter who actually ran up the charges if it is a joint account.

That agreement may still stand. Even if you're now divorced, if your ex doesn't pay, the lender still considers you responsible for the debt. That's your name on the agreement. You can run into the same issue if your name is on the car loan or the mortgage. You agreed to pay. The lender does not care that you got divorced and you are no longer a couple. You're still one of the two borrowers who signed on.

As one financial expert put it: "Through your divorce decree or separation agreement, the debt is divided between you and your husband, but that does not mean your liability for any portion of the debt is magically lifted."

Therefore, your ex's financial problems could become your financial problems.

Getting around it

One way to get around this is to actually eliminate the debt at the time of divorce. Pay off the credit card, cancel the account, and get your own cards. Sell the car you bought together, pay off the loan, and buy your own cars. Do the same with the house. When you divorce, do it without debt and without any joint agreements. Then you can split up assets and start over, alone, without any worry about your ex's financial future.

As you can see, it is very important to know how divorce and bankruptcy sometimes intersect. Be sure you are aware of your legal options.

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