Wrongly Accused: Criminal Defense 101

« Back to Home

How Indemnification Clauses Can Protect You Financially After Your Divorce

Posted on

Divorces take time and money, and some can be very complicated to settle. One challenge you may encounter during your divorce is finding the best way to divide joint debts. Ideally, you should aim for splitting up your debts so that each spouse's debts are in his or her name alone. Unfortunately, this option is not always possible, which is why divorce lawyers often suggest the use of indemnification clauses. Here are three things to know about these common clauses found in divorce decrees.

What Is An Indemnification Clause?

When a couple is able to split up debts in a way that each person's name is the only name on the debt, an indemnification clause would not be necessary. When this cannot happen, it means that a joint debt will remain in both names after the divorce; however, only one of the spouses will be responsible for the debt. In this situation, and indemnification clause will protect the spouse that is not responsible for the debt, even though his or her name will remain on it.

An indemnification clause for a situation like this will be listed in the divorce decree. It will state that one spouse is responsible for this particular debt, and it will list the spouse's name and the name of the creditor. It will also state that the other spouse is not responsible for this debt.

By adding a clause like this for each debt that will remain in a joint account, you will have protection over debts that you are not responsible for. Unfortunately, these clauses create contracts between you and your spouse, and they are not legal contracts with the creditors of the joint debts.

What Limits Do These Clauses Have?

If your ex-spouse fails to pay a certain debt listed on the divorce decree in an indemnity clause, the creditor of this debt has the legal right to go after both parties to collect the money owed. Because of this, your credit score may be harmed if your ex does not pay debts he or she is responsible for. You can always pay the debts yourself to protect your credit, and you can then sue your ex for the money. While this information may make it seem like the clauses are worthless, they really are not.

If your ex fails to pay one of these debts, you have the right to take him or her to court over this issue. When you do this, you can present the divorce decree to the court to prove that the debt was not yours. By doing this, the court will see that your ex was responsible for the debt, and they will order your ex to pay the debt or repay you for it if you paid it out of your pocket. This is the recourse indemnification clauses offer to you.

Is There Anything Else You Should Know?

There is one other important detail you should be aware of if using indemnification clauses, and this detail pertains only to joint debts that are secured by some type of asset. If there is a joint debt, such as a house or car loan, that your ex will be responsible to pay, you should not allow your name to be removed from the title of the property until he or she refinances the loan in his or her own name. If your name is removed from the title and not from the loan, you could end up being responsible for the loan yet have no rights to the asset itself.  

In addition, it's also important to include deadlines for refinancing assets. Along with a deadline, there should also be a consequence for the spouse failing to comply.

Understanding how indemnification clauses work is very important if you will be left with joint debts after your divorce. To learn more about this subject, contact a divorce attorney today. For more information, contact a practice like Lawyer Referral Service of Central Texas