EX-Spouse Debt, can it be yours if they die?

[DFA]

Read this article today and it got me wondering if you would need to put this in your planning? It is a short article about ex-spouse debt that you may be responsible for if they die and have not paid it off.

A dead ex-spouse's debt can become your problem - Jun. 25, 2014

 

[Indigo Mule]

Only debt acquired before the dissolution of your marriage. After divorce, the debt newly incurred by your ex-spouse is not your responsibility.

 

[RunningBum]

Not sure what that means to "put it in your planning". The best course would be to close all common accounts during the divorce. If a home is being kept, whoever is keeping it needs to get a new mortgage. Get rid of all joint credit cards. Cars might be tricky since I'm not sure how easy it is to refinance a car you already own so you might let that go figuring the spouse will outlive that loan, and the car is an asset behind the loan anyway.

Does the spouse even need to die? What if the spouse just stops paying on loans and your name was still on it?

 

[Backpacker]

I am in the money lending business, and can't tell you how many times I've met with prospective borrowers and they squeal when I show them the delinquent loan on their credit and they say - "that is my ex's debt, the divorce decree says so..." Lazy (or ignorant) divorce attorneys give a false sense of security when they put in the decree that the visa is party "A's" responsibility. The divorce decree can't jump ahead of the legal contract between bank and origianl borrowers.

 

[Andre1969]

My ex-wife ended up running up some debt after we got divorced. Well, she ran up a lot more before the divorce, but that's a different story! Anyway, after the divorce, a credit card offer came in the mail to her. Her name is Rochel, but it came addressed to "Rachel". Still, she filled it out, sent it in, and got a phone call. When the company asked how she intended to pay on the card with no job, she said "Oh, my husband will take care of it!".

And bam! Approved for $5,000!

Credit card companies were awfully trusting back then. Naturally, she maxed it out and then defaulted. However, I never heard so much as a peep out of them, trying to get payment from me. And I'm really surprised that they took her word that her husband would take care of it, without trying to run my credit. And at the time, I was about $27,000 in debt, and going through Consumer Credit Counseling Service, so I'm sure my credit score was pretty bad at the time. As far as I know, she didn't put my information on the application and forge my signature...at least, this card never showed up on my credit report when I would periodically pull it.

 

[athena53]

When I divorced a debt-ridden man (I was paying the bills for all the basics like food, housing and utilities and he was running up cc debt buying nice things for himself), his attorney asked me for a list of the creditors and the amounts owed so he could settle them. (Even after that, I estimate that my Ex ended up with about $100K from the proceeds of the house.) All the debts were in my Ex's name only but his unpaid hospital bill ended up on my credit record because they're considered to be a joint responsibility of husband and wife. (They actually tried to attach my wages but my lawyer fought them off.) I guess I'm fortunate that the lawyer settled the bills and that there was enough money to do it.

My Ex died penniless in 2010. An attorney I contacted at the time told me that if a creditor tracked me (or DS) down asking for money we should tell them there was no estate but that they were free to open estate proceedings if they wanted to. Fortunately, no one contacted us. In my case, though, we'd been divorced since 1997 and the only debt that might have been considered a joint obligation (the hospital bill) had been settled long ago.

One of the big mistakes I read about is where one spouse gets possession of the house but they never refinance the mortgage. Sometimes the other spouse even deeds their interest over to the spouse who will occupy it, believing that that will get them off the mortgage. Ummm, no, it won't.

 

[MissMolly]

Does the spouse even need to die? What if the spouse just stops paying on loans and your name was still on it?

Then you are still responsible for the debt. Having worked in the mortgage business for 30 years, I saw this scenario happen time and time again where one spouse was awarded the property and the debt and the other spouse thought they were off the hook - until the payments stopped coming in. We would contact both spouses in an attempt to get the money owed. If payments were not forthcoming, the foreclosure was filed naming both parties. Unfortunately, you cannot force someone to refinance a mortgage in their name only. Many times, they don't qualify and there is nothing that can be done. It was always a sad situation for the spouse who thought they were done with the whole thing. I always felt bad for them, but there was nothing to be done about it.