Divorcing couples in Arizona and around the country often make difficult choices, and some of these decisions can influence their lives for years to come. It is not uncommon for divorcing spouses to make concessions during property division negotiations to reach a settlement quickly and put the whole process behind them, but making important decisions without considering all of the financial ramifications can leave spouses open to harassment from bill collectors and with credit damage that can take years to rectify.
The most valuable assets covered during property division talks, such as cars or homes, are often financed with loans that both of the spouses signed. The problem is that lenders are not bound by the provisions of court-ordered divorce settlements and will pursue all signers for payment when loans fall into arrears. This means that when jointly held loans are not paid off, spouses may be hounded for payment even when they have ceded their ownership interest in the asset.
Another problem facing spouses who allow joint loans to remain open is that they rarely learn about delinquent payments until their credit ratings have been compromised. Banks generally report the timeliness with which pavements are made to all of the major credit agencies, and this information appears of the credit reports of all of the signers and not just on the report of the spouse who actually makes payments. This means that by the time collection efforts begin, which is usually when loans are 60 or 90 days past due, credit reports will already show several late payments.
To avoid these unfortunate situations, family law attorneys may advise their clients to insist that all jointly held loans be paid off or refinanced solely in the name of the spouse who receives the asset under the terms of the final settlement. They may make this suggestion vigorously when the divorce is a contentious one as it is not unknown for spouses to stop making payments on joint loans just to ruin the credit ratings of their former partner.