Most divorce decrees and marital settlements will address the debts that exist at the time the parties separate. There is usually some type of division of the debt. Most couples have debt that turns out to be his, mine and ours. The only party that the creditor is interested in is the person who is actually liable on the debt. A creditor does not care if your divorce decree states that your ex-spouse should pay a debt that is in your name. The creditor is going to collect against the person who is named and liable on the debt itself, regardless of what is called a “hold harmless provision” in a divorce decree.
The Hold Harmless language is an indemnification provision that provides for the spouse that was assigned to pay a particular debt to do so, leaving the other marital party unharmed by the debt itself. The division of debt can become a real issue in bankruptcy. Even the hold harmless indemnification can be a contingent debt in a bankruptcy. §523 of the United States Bankruptcy Code provides that any debt to a spouse or former spouse that arose during the dissolution of marriage is non-dischargeable in a chapter 7 case. Although the spouse who files for bankruptcy can discharge the debt as to the creditor, he or she cannot discharge the obligation to hold the former spouse harmless.
If you have been through a divorce it is very important that you are familiar with your obligations on any marital debt, especially if you are in a position of needing to seek bankruptcy assistance. This will allow you to get the best advice possible. The division of debt and whether or not there are any hold harmless provisions in your divorce decree will be a factor in determining what will be the most helpful bankruptcy option to utilize to try and avoid any issues stemming from the marital settlement of debts.
If you are currently struggling with debt for any reason, please call our office nearest you and set up a consultation with one of our attorneys. We have experience in this area of law. Our attorneys will review your situation with you in a private and confidential setting and advise you of any options that we can to help you. If these types of marital debts are a concern to you, please bring a copy of your divorce decree when you come to our office for your free consultation visit.
Amy K Tanner is a shareholder in several of the Bond & Botes Law Offices. She holds a Bachelor of Science from Auburn University at Montgomery, and a Juris Doctorate from Thomas Goode Jones School of Law. She focuses primarily on consumer bankruptcy law in the Huntsville and Decatur offices.Read her full bio here.