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Divorce and bankruptcy: Do I still have to pay?

When divorce and bankruptcy mix, sometimes confusing situations can result. Debt relief advisers say they encounter situations where one spouse is ordered to continue paying on a debt even when the other person declares bankruptcy. Are you still compelled to continue paying on a debt that your spouse has discharged through personal bankruptcy proceedings?

When two people dissolve their marriage, they agree to sign a formal document known as a marital settlement agreement. In that document, both people resolve financial matters that may be relevant to the marriage, dividing both assets and debts as deemed appropriate.

Some people choose to share responsibility for debt that is not officially in their name. This is probably because they shared the responsibility for generating the debt in the first place. This is not an unusual decision, according to financial experts. Sometimes, one spouse forfeits rights to a vehicle or other property in order to compel the other partner to pay off a specific debt.

If your spouse has changed a specific account to be in his or her name alone, for example, and they then declare bankruptcy, it is likely that you will not have any liability toward that debt. Be sure to check with your financial and legal counsel before you stop making payments, however, because some stipulations could still be in place.

First, be sure that your name is no longer on the account in question. You could still be held responsible for the debt if your name turns up on a financial document associated with the account. To check on this, call the credit card company to find out whether they have your Social Security number on file. If the company does not know who you are, then you are probably free from paying the debt.

Also, double-check that the debt was actually eligible for discharge during bankruptcy. If the debt was student-loan related, for example, you could still be responsible for repayment even after a Chapter 7 proceeding. Before you stop paying any debts, even if you think you have been released from the agreement, check with your lawyer and financial adviser.

Source: Fox Business, "Keep paying ex-wife for discharged debt?" Justin Harelik, Oct. 16, 2012

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