Colorado spouses in the midst of divorce proceedings should know that joint financial obligations between a married couple do not automatically split in two when the parties divorce. Unfortunately, one spouse may still be liable for the obligations entered into during marriage, even if that spouse is not the primary or continuing borrower of the loan.
For example, a spouse who co-signed a loan taken out by the other spouse will still be liable for repayment of the loan even after the parties file for divorce. When a person co-signs a loan, that person is agreeing to be responsible for the repayments if the other party fails to make them. This is a contractual obligation that is not severed when the parties divorce.
Since both parties are still responsible for a co-signed loan pending or following a divorce, both parties can also be penalized and suffer damage to their credit scores if the loan is not repaid. Therefore, even if the party who originally took out the money is refusing to make repayments, the only way that the other party can prevent damage from being done to either credit score is to make payments on behalf of both parties.
A family law attorney may be able to work with a judge to determine a feasible repayment plan with which both parties can comply. The attorney may also be able to aid in refinancing a loan to put it in only one person's name. That person would then become the sole borrower, so only their credit score would be damaged on non-payment.
Source: ABC News, "What to Do if You Want Your Ex to Pay a Co-Signed Loan", Deanna Templeton, August 17, 2013
Tags: Divorce
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