When you are married, you and your spouse accumulate debts together. Most likely, those debts are either in one or both of your names. From a divorce attorney’s perspective, it is always best if the debt is in your name or your spouse’s name and it is associated with an asset that you are receiving. For instance, if you are awarded the car but there is still a note on the car—as long as the note is in your name alone, awarding you the car and the debt associated with it does not create an issue for your spouse. But, if the debt is in both of your names then the other spouse either wants you to refinance OR sell the asset. Reason being, if your spouse is ordered to pay a debt that is in both of your names but fails to do so then it affects your credit and the creditor can still come after you for repayment of that debt.
In some instances, people rely upon indemnification provisions within divorce decrees in order to protect them when a debt is in both parties’ names but only one spouse is ordered to pay the debt. An indemnification provision looks like this:
“Each party represents and warrants that he or she has not incurred any outstanding debt, obligation, or other liability on which the other party is or may be liable, other than those described in this decree. Each party agrees and IT IS ORDERED that if any claim, action, or proceeding is hereafter initiated seeking to hold the party not assuming a debt, an obligation, a liability, an act, or an omission of the other party liable for such debt, obligation, liability, act or omission of the other party, that other party will, at his or her sole expense, defend the party not assuming the debt, obligation, liability, act, or omission of the other party against any such claim or demand, whether or not well founded, and will indemnify the party not assuming the debt, obligation, liability, act, or omission of the other party and hold him or her harmless from all damages resulting from the claim or demand.