Perhaps you have been in the middle of a divorce yourself and spoke these words. Maybe you’ve heard this while trying to get payment from one of your customers. Chances are, if you do any type of billing or debt recovery work, you will hear something like this early and often. What effect does a divorce judgment have on creditors rights?
The short answer is: none. But it rarely is that simple, and divorces and the arguments over who has to pay what have an impact on creditors’ bottom lines as well as the people tasked with trying to collect between the arguing parties. Let’s take a look at what a divorce can mean to a creditor and how it practically plays out in the collection process.
First, you as the creditor were not invited to the court process when the divorce was going on and you didn’t agree to the terms of who has to pay what. A such, it is not binding on the people the recently divorced owe money to. If they have agreed to split paying different bills in some fashion, the creditor can go along with that, but is not bound to do so. A divorce decree (or judgment) is an agreement between the spouses and the court, not the creditors. So if they agree to pay 50% of this bill or that one, the creditor’s right to collect have not changed.
Second, the underling reason for owing the bill has not bee altered. If it is a medical debt covered by ORS 108 as a family necessity, the law hasn’t been changed by their divorce so the creditor’s rights have not been changed. A creditor can still pursue either party, or both, at their choosing. If the spouses signed a contract, such as buying a car or appliances, both are still responsible to pay the full amount owed under the terms of the contract.
If an ex feels like they paid more than the divorce decree set forth, it is up to them to take their ex back to court and collect the difference. These fights are and should remain between the divorced and not include creditors.
Creditor’s rights are not affected by the divorce, but the ability to collect usually changes, and not in a good way. You are now placed squarely between two parties who are arguing over who has to pay what, were given legal counsel by their lawyers as to who would have to pay what, and generally have a bitter outlook toward their ex-spouse and don’t have a problem letting everyone within ear-shot know about it!
It is not unusual for one of the ex-spouses to file for bankruptcy following the divorce settlement, thereby forcing creditors to pursue only one of the pair for recovery of their debts. It is also not unusual for one of the exes to have a child support garnishment in place, effectively making it impossible to collect from that person even if they don’t file bankruptcy.
As a practical matter, divorces often lead to the inability to recover your debts, but not because the divorce decree says so. Creditors have rights and they are not changed by the divorce of their debtors, but they are impacted in their ability to get paid what they are owed.