According to New Mexico law, all debts incurred during a marriage are considered to be community property and will be divided equally between the spouses during a divorce. Separate property is individual property acquired before the marriage through purchase, gift, inheritance, and property that has otherwise been legally established as separate property.
What many people fail to understand is that while the New Mexico district court allocates portions of community debt to each spouse as part of a divorce decree, that district court order does not bind third-party creditors.
This means that, even though a divorce decree assigns a particular debt to one of the spouses, if that spouse does not pay on the debt the creditor continues to have a legal right to pursue the other spouse for payment of the debt. This can result in a spouse being pursued by a creditor for debts not contemplated under the terms of the divorce decree.
Since most creditors will not allow you to just switch the account holder designation from one individual to another, your recourse lies with the family court that handled the divorce proceeding. A claim can be brought against the ex-spouse for violating the divorce decree by not paying his or her share of the debt assigned to them and for restitution.
There may be some recourse for the innocent spouse in form of court ordered restitution. Restitution is repayment of any money paid by you to a creditor that should have been paid by your ex-spouse.
The divorce court can also assist you by ordering the ex-spouse to cooperate by completing necessary paperwork or signing documents that may allow you to have debt moved from one spouses name to the other. For example, the court may order one party to attempt to open a credit account in order to transfer the balance to that account. This would insure that the debt is only in the spouse's name that was assigned the debt in the divorce decree.
Also, the court can order a spouse to seek refinancing of a mortgage still held in both spouses name or to attempt to sell off property that was allocated by the decree to one spouse and for which the debt has become delinquent.
Unfortunately one spouse's failure to pay his or her debts as assigned by the divorce decree can have a negative impact on the other spouse's credit rating. While a negative credit reporting cannot be removed, you can annotate the negative reporting with a 100 word comment stating why the account was not paid pursuant to the terms of the contract with the lender. This may not likely improve your credit score, but if you do apply for credit in the future it will allow those future creditors to better understand your situation when they review your credit report.
While these type of post-divorce payment problems may not be completely avoidable, one way to mitigate the damage is to provide as much detail as possible in the marital settlement agreement and final decree of divorce. This would include very specific provisions regarding the legal and binding transfer of debt from one party to the other.
Most importantly, parties should be ordered to refinance debt whenever possible so that ongoing debts don't remain held in both parties' names. This provision should include detailed timelines for when and how debts will be repaid. It is very often worth the time and money required to discuss allocation and payment of community debt with an experienced family law attorney in order to ensure that things go as smoothly as possible once the divorce is completed.
Protecting Your Credit Before, During, and After Your New Mexico Divorce
Financial Recovery After Divorce: There is a Light at the End of the Tunnel
New Mexico Marital Settlement Agreement is Final, Binding and Very Hard to Modify