Can a creditor still collect from the person who signed the loan but transferred the responsibility to repay the debt totheir spouseduring divorce?
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Can a creditor still collect from the person who signed the loan but transferred the responsibility to repay the debt totheir spouseduring divorce?
The contract states that the personal loan is for the person’s education and she was the only one who signed the contract. Can she be obliged to pay her loan (for her education) even though the judge grants her request that the debt be transferred to her husband? It is very likely that the husband will not pay for this regardless of the judge’s order.
Asked on October 24, 2011 under Bankruptcy Law, California
Answers:
M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney
Answered 12 years ago | Contributor
Regardless of what a divorce decree might state, since a creditor is not a party to the divorce action, the spouse whose name that the debt is in remains liable for it. In other words, the person who signed for a loan cannot transfer the responsibility of repayment to another (at least without the creditor's approval). Although, the spouse that the court orders to pay the debt is still responsible to the spouse who initially incurred it.
That having been said, since CA is a community property state, both spouses are liable. The spouse who did not originally incur the debt is also responsible to the creditor because in a CP state, a spouse assumes all of the other spouse's financial obligations (both pre and post marriage).
Accordingly, if the ex-husband doesn't pay as per the divorce decree, he can be held responsible for reimbursing his ex-wife for any money that she may have to pay out-of-pocket on the debt (since she remains liable to the creditor). Additionally, if the ex-wife also doesn't pay, the creditor can sue the both ex-spouse's.
Note: Since the defaulting spouse is in violation of the divorce decree, they can be held in contempt of court for not paying any debts that they have been ordered to pay.
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