Debt and Divorce in South Carolina

I have conducted thousands of divorce consultations over my career, and I have noticed a surprising trend over the years. Post-divorce debt is an important issue that is almost always forgotten by the parties when considering whether to divorce their spouse. Many people are under the impression that the spouse at fault for the divorce will be stuck with the debts or that creditors will just “write off” the debts when they know the parties have divorced. Many also believe that once the debt has been assigned to a particular spouse by the family court, all the work is done. However, I spend a great deal of time counseling clients and potential clients that these misconceptions can and will hurt them in the end. It is important to have a plan for dealing with the debts left over after the marriage, even when the party required to do so isn’t dealing with it.

Allocation of Liabilities through Divorce Orders

Most divorce (or separation) orders will allocate liabilities for pre-divorce obligations between the former spouses. For example, the husband may be required to pay certain credit card obligations and similar debts, while the wife may be required to pay a car loan or some other debts. While the Family Court order may require a specific spouse to be responsible for a certain debt, that court order does not release either spouse from the obligation they have to the creditor. That obligation is tied to the original contract signed when the debt was incurred and will be upheld in civil court if the creditor decides to sue for collection.

Both Parties Remain Liable for Debts

The fact is that even if a settlement agreement lays out who is to pay what debt, it does not mean that the other party is legally released from what once was a “joint obligation.” If the spouse responsible for continuing to make payments falls behind, the other spouse also remains liable, regardless of what the divorce decree says. Further, those debts and any late payments can and will still be reported against the credit reports of all parties’ names which were originally listed on the debt.

Pay Attention to Credit Accounts

The Federal Trade Commission advises anyone considering divorce to pay special attention to the status of their credit accounts. If you maintain any joint accounts with your soon-to-be ex-spouse, it’s critical that you continue making regular payments so that your credit score won’t suffer. As long as there’s a balance owed on a joint account, you both remain legally responsible for it.

Consult an Attorney Before Closing Accounts/Joint Accounts

When you decide to divorce, it is wise to discuss with your South Carolina family law attorney whether or when to close joint accounts and accounts where your former spouse is listed as an authorized user. It may also be possible to approach the creditor directly and ask that they convert the account to an individual account.

Closing or Transitioning Accounts by Creditors

By law, a creditor cannot automatically close a joint account simply due to a change in marital status. However, creditors can close accounts at the request of either spouse. The creditor can require you to reapply on an individual basis and then, based on your new application, extend or deny you credit. If the debt in question is a mortgage, the creditor or the court may then require the spouse responsible for maintaining the debt to refinance and thus totally remove the other spouse from the obligation. If the court has ordered for this to happen, make this an immediate priority to avoid the penalties if your ex-spouse falls behind on those payments in the future.

Contact a South Carolina Family Law Attorney

Debt issues can make an already difficult divorce even more complex. If you find yourself grappling with financial questions, it’s important to have an experienced South Carolina family law attorney on your side who understands the complexities of the money issues you face.

Ben Stevens has provided exceptional legal counsel and support to families throughout South Carolina for over twenty-five years, handling all matters of family law, such as divorce, separation, alimony, and child custody. Our firm is well-equipped to handle all divorce and family law matters, no matter your circumstances. Contact our office at (864) 598-9172 or SCFamilyLaw@offitkurman.com to schedule an initial consultation.