Because of Tennessee’s equitable distribution statutes, assets and liabilities acquired during marriage belong to both spouses. A divorce may include creating a plan to divide or resolve outstanding debts as part of a couple’s settlement.
As noted by Experian.com, two soon-to-be ex-spouses have equal responsibility for paying debts owed on their joint credit cards. Even after divorce, creditors may seek repayment from either individual named on a joint account. If an ex-spouse neglects to make payments, creditors may sue both account owners to retrieve the amount owed.
Paying off or assuming shared debts
Couples may have the option to sell their shared marital assets and use the proceeds to pay off their debts. Some credit card issues may require paying off a card’s balance before closing the account. When liabilities exceed assets, spouses may discuss a fair division. A divorce decree may list the amount each party has responsibility for paying off.
Forbes describes how individuals may apply for their own credit card accounts. Each spouse may then transfer their portion of the balances from joint accounts. Some divorce decrees may also include language that indemnifies an ex-spouse from paying off a jointly held debt. With balance transfers, couples may request that credit card issuers close their joint accounts.
Consolidating through personal loans or a mortgage
As reported by CNBC, individuals with various consumer debts may apply for a personal loan and pay them off. Divorcing couples may also discuss which spouse will keep the home. Taking over a shared home may involve applying for a new home loan or refinancing a mortgage, according to Bankrate.com.
Some divorces may include a spouse using a home’s equity to “buy” a spouse’s share or pay off a couple’s outstanding loans. Discussions may include taking ownership of assets or exchanging them for a fair share of debts.