You have survived the divorce process, it’s final!  You can move on and start fresh!  Ut oh, what!  Your Ex has filed bankruptcy?  No problem right…I’m free and clear!  Umm, wait maybe not?

In the divorce decree, you were made responsible for certain debts and your spouse was given responsibility for other debts.  That’s what the judge ordered.  You’ve paid your part as agreed, but apparently your ex is unable to pay their part and they want to be relieved of this debt.  Not your problem, right?  

This is a common misconception.  The judge ordered the responsibility, but you still have liability for any joint debt that you applied for and received from the creditors.  If your ex is relieved of this debt through a bankruptcy the creditor can collect the entire balance from you.

So, what should you do?  Here are some tips, to get you started, but for specific advice based on your particular circumstances, go back to your team for help.

  • Review any joint debt and create a plan with your attorney.
    • If possible, make sure that all joint debt is paid off and closed as part of the divorce.
      • If you are selling your home as part of the property settlement, maybe some of the proceeds can be used to pay off all joint accounts.
    • In some states, you are not allowed to cancel accounts during the divorce process, so if you need to, make sure you get permission to close all joint accounts so no new debt is added before the divorce is final or especially after it is final
  • If eliminating all joint debt is not possible at the time of the divorce:
    • Contact each joint creditor and ask if you can receive duplicate bills each month.
      • In this way, you will know if there are any past due balances before they become a problem.  This should not be used as an argument started, but only to protect yourself and your credit.
    • Monitor your credit!  Although if the divorce is final the bankruptcy should not appear on your credit, however, before someone files bankruptcy they are usually late on most payments.  If they become late on joint accounts that will show up on your credit and could have long term effects on your future.
  • You may want to contact a Bankruptcy attorney to discuss your options, if you get burdened with all the joint debt in the end.
  • If you and your spouse still both own the house when your ex files bankruptcy, the court could order the sale of your home (if there is enough equity that it would make sense) to pay off the creditors.  You would still get your half of the proceeds that were not used to pay off joint debt.  Example.  If your ex files bankruptcy and they owe $10,000 of the joint debt and $15,000 in personal debt, and the gross proceeds after the sale of the home is $50,000.  You would receive $20,000 of the proceeds.  $50,000 proceeds – $10,000 joint debt paid = $40,000 / 2 = $20,000.  Your spouse would have to pay off the personal debt from his half of the proceeds leaving them $5,000.  

Every divorce and bankruptcy situation is different.  This was not written to give any legal advice, but to give you some ideas to talk with your team about.