When the court finalizes your divorce, it provides you a copy of the final court ruling detailing the division of property and debt payment responsibilities of each party. This court judgment is commonly called a “divorce decree,” and you are required to abide by it. If you do not pay the debts the divorce judgment dictates that you are responsible for, you could face both legal and financial consequences.
While not all debts you owe appear on your credit report, credit card debts, mortgages and auto loans almost always do. Failing to submit payments on these accounts – or merely submitting the payments late – lowers your credit rating. If the debts the court deems you responsible for were originally joint accounts, such as an auto loan you and your spouse applied for together, the account and its payment history appears on your ex-spouse's credit report as well. A divorce does not change that. Thus, your failure to keep up with debts the court ordered you to pay could damage not only your credit but your former spouse's credit.
If the court ordered you to make child support payments or spousal support payments in the divorce decree, and you do not do so, your ex-spouse can return to court and request an enforcement order. The court will then force you to pay the designated amount by garnishing your paycheck. The court can also seize income tax refunds you are scheduled to receive and apply them to the spousal or child support you owe. The U.S. Department of Labor notes that the court can garnish up to 60 percent of your income for unpaid child support if you are not supporting another spouse or child. If you are supporting a dependent who is not the subject of the court order, the court will seize 50 percent of your earnings until you catch up on payments.
Creditors have the right to sue you if they do not receive payment on debts you owe. State laws vary regarding a creditor's enforcement rights following a lawsuit, but creditors generally have the right to garnish a percentage of your earnings, freeze your bank accounts and even seize property. According to the Federal Trade Commission, your divorce decree does not nullify the original contract that you or your spouse made with the creditor. Thus, if you and your spouse were joint parties to the debt, such as with a joint credit card account, the creditor has the legal right to sue either you or your spouse. This is the case even when the divorce decree assigns responsibility for payment to only one party.
Modifying Court Orders
If your financial situation is such that you cannot afford to pay off the debts assigned to you in the divorce judgment, you can return to court and request that the judge take your current income into account and modify the existing order. The court may require you to provide proof of your financial situation by way of past pay stubs and the previous year's W2s.
References & Resources
- Oakland County Michigan: Judgment of Divorce
- Federal Trade Commission: Credit and Divorce
- U.S. Department of Labor: Employment Law Guide – Garnishment
- University of Minnesota Extension: Rights of Unsecured Creditors
- Forbes.com: What's a Fair Divorce Settlement?
- MSN Money: 10 Steps to a Money-Smart Divorce
- Brand X Pictures/Brand X Pictures/Getty Images