Divorce may divide your property and debts, but it does not automatically remove either spouse from a joint loan or credit account. This can come as an unpleasant surprise when a creditor contacts you about a debt your former spouse was ordered to pay.
At Berken Cloyes in Denver, we help Colorado residents understand how divorce, creditor rights, and bankruptcy can overlap. If joint debt is making it difficult to move forward financially, it is important to know that your divorce decree and your agreement with a creditor are two separate obligations.
How Does a Colorado Divorce Divide Debt?
During a Colorado divorce, marital debts are generally allocated between the spouses as part of the overall division of the marital estate. The spouses may agree on who will pay each debt, or the court may decide when they cannot reach an agreement.
The final divorce decree may assign one spouse responsibility for a particular credit card, vehicle loan, mortgage, personal loan, or other obligation. That assignment determines each former spouse’s responsibility to the other under the divorce order.
It does not necessarily change what the original creditor can do.
Can a Creditor Still Collect From Both Former Spouses?
If both spouses signed a credit agreement, both generally remain contractually responsible until the debt is paid, refinanced, or the creditor formally releases one borrower.
A divorce court can order your former spouse to make the payments, but it ordinarily cannot rewrite the lender’s contract. If your ex stops paying, the creditor may still seek payment from you when your name remains on the account.
This may apply to joint:
- Credit cards
- Personal loans
- Vehicle loans
- Mortgages
- Lines of credit
- Medical accounts
- Utility accounts
Sending a creditor your divorce decree usually does not remove your responsibility. At Berken Cloyes, we often remind clients that responsibility under a divorce and liability to a creditor are related—but they are not the same thing.
What If the Divorce Decree Says My Ex Must Pay?
If your former spouse was ordered to pay a debt but fails to do so, you may be able to ask the family court to enforce the divorce decree. Depending on the wording of your agreement or order, you may also have a claim for reimbursement or indemnification if you had to pay a debt assigned to your ex.
However, pursuing your former spouse does not necessarily stop the creditor from contacting you, reporting missed payments, filing a lawsuit, or using other lawful collection methods.
Speak with your divorce attorney about enforcing the decree. If the remaining debt is affecting your ability to pay your own bills, our bankruptcy attorneys can help you evaluate your debt-relief options.
What Is the Difference Between a Joint Account and an Authorized User?
The name shown on a credit card does not always reveal who is legally responsible for the balance.
A joint account holder or co-borrower generally signed the agreement and may be responsible for the debt. An authorized user usually has permission to use the account but did not agree to repay it.
Review the original agreement and your credit reports rather than assuming that every account used during the marriage was legally joint. If you are unsure, we can help you identify which debts require closer review.
Does Removing Your Name From a Title Remove the Loan?
No. Transferring your interest in a house or vehicle does not automatically remove your name from the mortgage or auto loan.
For example, a divorce decree may award the home to your former spouse and require that person to make the mortgage payments. If your name remains on the loan, however, late or missed payments may still affect you.
Refinancing is one of the most common ways to remove a former spouse from a joint loan, but approval depends on the remaining borrower’s income, credit, equity, and the lender’s requirements. Selling the property and paying off the loan may be another solution.
What Happens If Your Former Spouse Files Bankruptcy?
Your ex-spouse’s bankruptcy does not automatically eliminate your liability for a joint debt. If your ex receives a Chapter 7 discharge, the creditor may still pursue you as the non-filing co-borrower.
Obligations created during a divorce can involve additional bankruptcy rules. Domestic support obligations such as child support and alimony generally cannot be discharged. Other divorce-related obligations may be treated differently depending on whether the case is filed under Chapter 7 or Chapter 13 and how the obligation is characterized.
Chapter 13 may temporarily protect certain co-debtors on consumer debts, but that protection has limits and does not give the non-filing former spouse a bankruptcy discharge.
Because the interaction between divorce orders and bankruptcy law is complex, do not assume your ex’s bankruptcy either releases you from the debt or eliminates your rights under the divorce decree.
What Can You Do About Joint Debt After Divorce?
Start by gathering your divorce decree, separation agreement, loan documents, current statements, collection letters, and credit reports. Then determine:
- Whose name is on each credit agreement?
- Who was assigned the debt in the divorce?
- Are payments current?
- Is refinancing or selling the secured property possible?
- Has either former spouse filed or considered bankruptcy?
- Is the creditor already pursuing collection?
Avoid transferring property, paying favored creditors, or filing bankruptcy before obtaining advice about the potential consequences.
Talk to a Denver Bankruptcy Attorney About Divorce-Related Debt
Divorce can end a marriage without ending every shared financial obligation. If your former spouse is not paying a joint debt, creditors are contacting you, or bankruptcy has become part of the situation, we can help you understand your options.
At Berken Cloyes, we help individuals throughout Denver and Colorado evaluate joint debt, creditor collection, Chapter 7, Chapter 13, and other debt-relief strategies. Call Berken Cloyes in Denver, CO, at 303-623-4357 to schedule a no-obligation case review and discuss the details of your financial situation.
This article provides general information and is not legal advice. Responsibility for a particular debt depends on the credit agreement, divorce order, bankruptcy chapter, and facts of the case.
