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How to Consolidate Debt After Divorce

How to Consolidate Debt After Divorce

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Mark Cappel
UpdatedJul 12, 2024
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    7 min read

Learn Your Options to Consolidate Debt After Divorce

A divorce can leave you owing credit card debt, car loans, a mortgage, student loans, and child support.

There are different programs you can look to for debt help, if you are struggling to pay all your debts.

Some debts can be enrolled in credit counseling or debt settlement plans. If you are in a severe hardship, it may make sense to discharge all of your qualified debts in bankruptcy.

Because different solutions may appy to different kinds of debts, let’s look at how to consolidate debt after divorce from these sources:

What Do I Owe After Divorce?

When it comes to family law, most states follow "common law." In common law states, when a married couple or domestic partnership splits, each person is responsible for debts in his or her name.

A credit card in your name is your debt. The same is true for car loans, mortgages, student loans, and other loans in your name. If you co-signed on a credit card or other loan, you still have have liability for the loan. This is even true for loans you co-signed with your spouse.

In some states, if one spouse has credit card debt related to medical debt, a mortgage or rent, or groceries, the other spouse may be liable for the debt, even if the account is not in their name. This rule does not apply to car loans or mortgages themselves.

Community Property

Community Property States
New Mexico


Ten states don’t follow common law when it comes to dividing assets and debts upon divorce.

In "community property" states, the presumption is debt incurred and assets acquired during the marriage are divided equally. This means both spouses share liability for debts incurred by one spouse. If you live in a community property state, this may be why a judge ordered you to pay for part of your spouse’s credit card debt, even if your name was not on the card.

Some states have exceptions to their community property rules. For example, in California, each spouse is responsible for their own student loans upon divorce, and not the student loans for the other spouse.

Some states make exceptions for debts that did not benefit the marriage. For example, courts will probably treat a credit card debt related to a cheating spouse’s purchase of expensive jewelry gifted to his or her lover as separate debt.

Whether you live in a common law or community property state, you may wonder if credit card issuers, auto finance companies, mortgage lenders, and other creditors are required to follow a court’s divorce decree. The answer is a firm, "No."

You and your ex are bound by the divorce decree, but it is not binding on third parties. In other words, you could still be responsiible for a debt that the divorce decree says is your ex's responsiblity to pay.

How To Consolidate Debt After Divorce

Which debt consolidation strategy you should follow depends on the debt. Let’s look at common debt types and the strategies that work best on each.

Credit Card and Medical Debt

Your three most likely strategies for handling credit card and medical debt that you cannot afford are consumer credit counseling, debt Settlement, which is sometimes called debt consolidation, and bankruptcy.

Credit counseling’s chief advantage is you pay-off the entire balance due over a five-year period. Your credit score will rebound quickly after you complete a credit counseling debt management plan. But while you’re in the plan, expect your credit score to suffer. Credit counseling will cost you more in monthly payments than the other two options.

Debt settlement is more aggressive than credit counseling. Expect a shorter time to debt freedom and a lower cost than credit counseling. Your credit score will take longer to recover. Be sure to research debt settlement carefully before you choose this option because this strategy has some significant pros and cons.

Bankruptcy is best for overwhelming debt you have no reasonable expectation to ever repay, or when you’re dealing with a creditor who has filed a lawsuit against you. Consult with a bankruptcy lawyer to file personal bankruptcy. Most home-made bankruptcy filings fail, and conversely, almost all lawyer-filed bankruptcy filings are successful.

Stop reading and start talking about your debt problem. Talk to a debt consolidation partner to learn more about ways you can resolve your debt. The advice is free, and may help you get on the road to debt freedom.

Automobile Loans and Home Loan Debt

Credit card and medical debt are unsecured debt, which is not tied to a piece of property. By contrast, car loans and mortgages are secured debts. A car loan is secured by the car, and a home loan is tied to your property. If you stop making payments on your car loan, the auto finance company has the right to repossess your car. If you stop making payments on your home loan, the lender can foreclose.

Credit counseling and debt settlement companies will not allow you to enroll current car loans, mortgages, or other secured loans in their plans. You can file bankruptcy when you have a car or home loan. However, if you stop making payments, it is possible for the lenders to ask the bankruptcy court's permission to repossess (in the case of a car loan) or foreclose if you stop making your payments.

What if you cannot afford your car payments? Talk to the finance company and your bank about refinancing the loan to a longer term.

What if you cannot afford your house payments? Read the article How to Avoid Foreclosure and Keep Your Home for strategies to handle a home loan payment you cannot afford.

If you have an deficiency balance from a repossession or foreclosure a divorce court assigned to you, talk to a debt settlement company. You might be able to include a deficiency balance in a debt settlement plan.

Student Loan Debt

You can consolidate and change your payment plan on federal student loans. Learn your options for handling your federal student loans, especially if your monthly budget is now stretched paper thin. Chances are, you can find a federal student loan payment plan you can afford.

Private student loans offer fewer consolidation and payment options. Learn your private student loan consolidation options, talk to your lender, and negotiate a payment you can afford.

Tax Debt

Some state and federal tax debt can be negotiated for less than the amount due. The IRS usually offers payment plans for delinquent tax debt. Talk to a tax resolution partner for a no-cost consultation about your tax issue, and your options for resolving it.

Child Support Debt

Federal and state laws give child support debt preferential treatment. As a practical matter, it is impossible to discharge child support debt in a bankruptcy. No reputable debt settlement or credit counseling company will include child support in their plans.

Talk to your divorce lawyer if the court set a child support payment you cannot afford. Notify your lawyer and the court if your income changes, or you lose your job.

Bills Action Plan

Don't be paralyzed by a divorce and let any debts that you have grow out-of-control.

  1. Use the no-cost, no-gimmick Debt Coach tool to get a personalized look at all of your debt resolution options.
  2. Talk to several companies that consolidate debt, to understand your options and the cost of each.
  3. Talk to your divorce lawyer if you do not understand why you owe a debt, or if the amount doesn’t make sense to you.
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Get rid of your debt faster with debt relief

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Did you know?

If you are struggling with debt, you are not alone. According to the NY Federal Reserve total household debt as of Quarter Q1 2024 was $17.69 trillion. Student loan debt was $1.60 trillion and credit card debt was $1.12 trillion.

According to data gathered by from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 10% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.

The amount of debt and debt in collections vary by state. For example, in Nevada, 32% have any kind of debt in collections and the median debt in collections is $2054. Medical debt is common and 16% have that in collections. The median medical debt in collections is $806.

While many households can comfortably pay off their debt, it is clear that many people are struggling with debt. Make sure that you analyze your situation and find the best debt payoff solutions to match your situation.