5 Tips About Late-Life Divorce and Your Money

5. What role does debt play in a late-life divorce?

A major role. Divorcing spouses should always obtain a credit report on both themselves and their spouses. It is amazing how eye-opening credit reports  can be; e.g., they can reveal undisclosed debt or unknown credit card accounts.

Divorcing later in life provides less time to retire debt. This is important: A divorce decree does not control creditors because the IRS, the home mortgage company and credit card issuers are not parties to the divorce, and they are not bound by the spouses' divorce agreement about who must pay which joint debt. If both spouses are on the liability ropes, a divorce decree that places responsibility for payment of a joint debt on one spouse will not provide 100 percent protection for the other spouse. How often has a wife been awarded the car, with the husband ordered to pay the secured note? When she goes to her driveway one morning and discovers her vehicle has been repossessed for nonpayment, what are her options? Unfortunately, few. Even if she has a claim against her former spouse for breach of contract, what makes her think he will pay her and not the creditor?

There are ways to reduce the risk of this happening. Put the car and car note with the same person, with an adjustment in other asset allocation. Put money into an escrow account to be released to the liable spouse upon full payment of the obligation. Award alimony to the car-owning spouse, in an amount to cover the debt payments. None of these methods provide 100 percent protection, but they may deter avoidance of debt obligations.

Janice Green, a fellow in the American Academy of Matrimonial Lawyers, has been a practicing family law attorney in Texas for more than 30 years. She's the author of Divorce After 50: Your Guide to the Unique Legal & Financial Challenges. This article is reprinted by permission of the author.