Many spouses pool their finances and take out joint credit accounts.
In other situations, one party may not qualify for credit individually so the other party will cosign for it. If the couple splits, this may not be the last time they deal with these accounts.
If debt is owed, the issue is far from resolved and can present many headaches in the future if it is not handled correctly.
Joint account holders share responsibility for the account and this extends to repaying debts.
If one of the people name don the account does not fulfill the financial obligation, the creditor is entitled to go after the other person for the entire amount of the debt. This can leave an ex-spouse on the hook for debt that he or she did not accrue on a joint credit account.
The Role Of The Cosigner
A cosigner is considered a secondary account holder. This individual agrees to share financial responsibility for a credit account. A common misconception is that a cosigner does not have the same liability as a primary account holder. The truth is that the responsibility of both parties is the same.
A cosigner serves as a guarantor that the account will be paid if the primary account holder fails to make payment. If a creditor cannot collect the money due from the primary account holder, it will approach the cosigner for repayment of the account balance.
Debt repayment decisions should be made at the time of divorce. If the couple has debt in both names and one person agrees to repay it, the creditor should be informed of this and provided with new contact information for both parties. Even a private agreement will not override the fact that both people are liable for the debt. However, the creditor will be able to inform one party if the other does not make payments, preventing the account from going into default.[needhelp01]
Try To Be Responsible..You”ll Be Better Off In The End
Failing to take responsibility for repayment debts on a joint or cosigned account can have serious consequences for both parties. If one former spouse does not meet the financial obligations, the other should do so to prevent damage to the credit ratings of both people. After repaying the money due, the payer can sue the former spouse if the failed payment represented a breach of the divorce agreement.
Financial obligations can make a messy divorce even more complicated. Ex-spouses should work out as many financial details as possible with each other and should communicate the situation to each creditor for joint and cosigned accounts. They should keep joint bills current during divorce negotiations. If possible, a joint account should be closed to additional charges.
If an ex-spouse runs up debts on joint or cosigned accounts, the other party should inform creditors in writing that he or she is not responsible for the charges. Though creditors may still attempt to collect the debt, the individual will have evidence of responsible action. Each spouse can also use individual debt consolidation loans to repay his or her share of joint debts and then close the accounts.