I AM NOT RESPONSIBLE FOR “HIS DEBTS” AND OTHER DELUSIONAL FABLES FROM THE DIVORCE COURT
If you have a healthy imagination, you can picture this in your mind, the divorce is over and the agreement has said, he pays one half of the bills and you pay the other half. Now two years have passed and you have just been served with a summons and complaint by the credit card company It seems that although you and your spouse allocated the bills, no one got the creditor’s input... the credit card company gave credit to both of you and although you and your spouse may decide who is to pay the bill, that doesn’t mean a thing to the Creditor (Plaintiff in that summons and complaint that the sheriff just delivered to you) If you are thinking that there must be a better way, you are right.
If there are assets to be divided and debts to be paid, it’s a lot smarter when both parties could be sued for a debt, that the assets be used to pay the bills before they are divided. Lets view a few examples: that Mercedes you both loved and bought with 300 easy payments that parallel the national debt is a good example. For example you value the car at $25,000 and the debt balance is $20,000, a net of $5,000. Husband just cannot live without “his car” (for which you co signed); You get a $5,000 asset and then a divorce. He gets the car into an accident that insurance won’t fully cover, he stops making payments and the car gets repossessed. The Creditor has expenses and unpaid interest and to make a long story very short, the $20,000 car is worth $10,000 and the debt, expenses and unpaid interest are not $30,000 and the Creditor decides it wants to get paid. You are the cosigner and thus, notwithstanding the divorce agreement making it his debts, you have just gotten sued and he is broke. Here is the message, you are getting sued for 20,000 and if you have it, the creditor will collect. You are now in post judgment court trying to get reimbursed by your dead beat spouse.
There is a better way and its part of paying attention to the debts as well as the assets that are divided in the typical divorce. Care should be given to be sure that if there are assets that are not being sold, you are given a release by the creditor before the judgment is entered. Or sell the car, pay the debt and distribute the net payment. Unless your spouse has the ability to pay it off, you are risking future legal problems allowing the divorce to be completed. This is not to say that you are completely without a remedy, you can always take your spouse back to court (post judgment or post decree) and start over again. Remedies include getting a money damage award or having your spouse found in contempt of court for failure to make the payments. The problem is that the process is long, since the divorce is over it will be protracted, and few people arrive at the other side of the problem completely satisfied.
When the divorce statutes talk about an equitable division of the Marital Property, they are referring to both the assets and liabilities (debts) and attention to not only the allocation of the debts, but also to the indemnification by the other party are very important. My own preference is to be sure that there is a very strong motivation to pay the bills, language that obligates the spouse to hold you “free, harmless, and indemnified from any of the expenses, debts obligations or assertion of obligations against you; and covers out of pocket costs, attorney’s fees and any other damages you may suffer as a result of nonpayment. I have always felt that the discharge of a debt was important enough to deal with in the same manner as an asset transfer. In today’s world of unside down real estate (where the mortgage balance is more than the net proceed of the sale) it is conceivable that giving one spouse the residence could result in the their being sued to the debt years later. Better to keep a short time limit on refinancing (with a penalty for a failure to refinance) rather an a vague promise of indemnity;
And just when you think you are out of the woods, there is a little known concept of the family expense statute 750 ILCS 65/15 that can hurt you when you least expect:
(750 ILCS 65/15) (from Ch. 40, par. 1015)
Sec. 15. (a)(1) The expenses of the family and of the education of the children shall be chargeable upon the property of both husband and wife, or of either of them, in favor of creditors therefor, and in relation thereto they may be sued jointly or separately.
(2) No creditor, who has a claim against a spouse or former spouse for an expense incurred by that spouse or former spouse which is not a family expense, shall maintain an action against the other spouse or former spouse for that expense except:
(A) an expense for which the other spouse or former spouse agreed, in writing, to be liable; or
(B) an expense for goods or merchandise purchased by or in the possession of the other spouse or former spouse, or for services ordered by the other spouse or former spouse.
(3) Any creditor who maintains an action in violation of this subsection (a) for an expense other than a family expense against a spouse or former spouse other than the spouse or former spouse who incurred the expense, shall be liable to the other spouse or former spouse for his or her costs, expenses and attorney's fees incurred in defending the action.
(4) No creditor shall, with respect to any claim against a spouse or former spouse for which the creditor is prohibited under this subsection (a) from maintaining an action against the other spouse or former spouse, engage in any collection efforts against the other spouse or former spouse, including, but not limited to, informal or formal collection attempts, referral of the claim to a collector or collection agency for collection from the other spouse or former spouse, or making any representation to a credit reporting agency that the other spouse or former spouse is any way liable for payment of the claim.
(b) No spouse shall be liable for any expense incurred by the other spouse when an abortion is performed on such spouse, without the consent of such other spouse, unless the physician who performed the abortion certifies that such abortion is necessary to preserve the life of the spouse who obtained such abortion.
(c) No parent shall be liable for any expense incurred by his or her minor child when an abortion is performed on such minor child without the consent of both parents of such child, if they both have custody, or the parent having custody, or legal guardian of such child, unless the physician who performed the abortion certifies that such abortion is necessary to preserve the life of the minor child who obtained such abortion.
(Source: P.A. 86689.)