man pulling money out of wallet

Debt Collection & Divorce

You are going through a divorce, and the bills are piling up because what was once a two-income household has become a one-income household. The bill collectors won’t stop calling adding even more stress to an already stressful time. What are you supposed to do? How can you possibly keep your sanity during this time? This may especially ring true to many due to the current COVID-19 pandemic and the unusually high number of people unemployed.

One of the first things I ask my clients for is a list of debts along with the list of assets. I often use the debts as leverage in asset division, i.e., one spouse agrees to take on more of the debt for an additional asset or vice versa. I have found that many people overlook the importance of dividing the debt, but it is just as important (in some cases, more important) as dividing assets. Just as the courts want the assets divided fairly, they also want the debts divided fairly. The courts strive to give both parties to the divorce a fair settlement. Arkansas is an equitable division state meaning that the spouses will not necessarily receive half of everything. The court strives to determine a fair, reasonable, and equitable division of assets and debts. The courts will also consider what assets and debts each spouse brought into the marriage. For example, it is not uncommon for spouses to bring student loan debt into a marriage. If this debt was acquired before the couple was married, it belongs to the spouse that took out the loan. However, all settlements are ultimately governed by a prenuptial agreement if one was signed.

Secondly, I advise my clients to contact their mortgage lender and try to work out some sort of temporary alternative payment arrangement. It is always best to do this early on and be transparent. Lenders are more likely to work with you if you are honest and try to put forth some sort of effort to pay them.

Now, to deal with those annoying debt collectors.

  • You have the right to tell them to stop calling you. You will need to send them a certified letter, return receipt requested demanding that they stop calling. This does not mean the debt collection has stopped, just the calls. If a debt collector continues to call you at work after you have asked them to stop, you may have a claim under the Fair Debt Collection Practices Act. You may be able to recover damages, attorney’s fees, and costs from the collection. You have one year from the alleged violation to file before the statute of limitations takes effect.  
  • Bill collectors cannot discuss your debt or personal business with anyone, including family members and employers.
  • They are not allowed to speak to you with profanity nor abusive language. They cannot threaten to call your relatives, employers, or friends to ruin your reputation.
  • If you have the money to pay the debt, many debt collectors will settle with you for a reduced amount.
  • The statute of limitations for most debts under Arkansas law ranges from two to five years. Keep in mind, any promise to pay the creditor to pay even a reduced amount or set up payment plans, may revive the debt so that the statute of limitations is no longer in effect barring the collection.

One very important thing to keep in mind, no matter who has agreed to pay for the debt, if your name is on it, you are responsible for it regardless of what the divorce papers say. Your credit will be the one affected. It is strongly advised to take the debt in your name to assure it is paid. If you are both on a mortgage, it is best to have the spouse keeping the home to refinance in his or her name only. Many couples often do this to cash-out the equity to pay the spouse moving out of the home his or her equity due. Consulting Kevin Hickey Law Partners will help ensure that your interests are best represented throughout your divorce settlement and beyond.