Some divorced couples breathe a sigh of relief once the final documents are signed. This could be for many reasons, but one reason is probably because they think they are finally off the hook when it comes to their former spouse’s debt. From this day forward, they think, I’m no longer responsible for someone else’s money issues. But is that really true? In community property states like Arizona, it may not be.
In these states, when it comes to property division, the assets and debts are often shared. So it makes sense that if a married couple entered into a loan together, or had a joint credit card, the court tells each person to pay a portion of the balance due. For example, one ex-spouse pays his or her share, but the other doesn’t and the one who didn’t pay dies. It’s entirely possible that the creditor may come knocking on the door of the living ex-spouse, the one who already paid what he or she was supposed to pay.
The reason this may occur is because the creditor didn’t enter into any type of agreement to forgo payment in case of a divorce. The creditor only sees both names on the original loan or credit agreement and the bank doesn’t really care who did or didn’t pay, it just wants the money owed. So, all of a sudden, the ex-spouse who thought everything was fine, now finds him or herself on the hook for an old debt.
One way to take care of the issue is to pay the money, then sue the estate of the deceased ex-spouse and hope the estate has the money. For those who have not yet legally divorced, a possible way to avoid the situation is to erase one party’s liability. Whether this is a strong possibility or whether there are other options may vary, depending on many factors.
Source: WQAD, “Your dead ex-spouse’s debt can become your problem,” Katrina Lamansky, June 25, 2014