[trollmac]

My ex-husband and I divorced in 2001. As part of our Separation Agreement, he was to assume a line of credit. He did not do this and now he has claimed bankruptcy. I have been contacted by a collection agency, by phone only, trying to arrange for me to pay this outstanding debt. What should I do??

[dontknownuthin]

The difficulty of the situation is that the line of credit was entered into by both of you and they are not obligated to take you off the account because they approved it on the basis of your joint application. They have every right to come after you for the debt because you were originally on the account. Only if the account was never also in your name can you get out of the obligation to them.

You, in turn, have the right to go back to family court as your husband should not have included this debt in the bankruptcy, given that he had a separate court order from that court to pay the debt. However, the difference is between you and your ex, not you and the creditor.

I suggest you pay the debt and also go after him to repay it to you via a garnishment of wages. Otherwise they may sue you, ruin your credit, etc.

Same if it were a car loan or credit card account or mortgage - the divorce court can order either of you to pay it, but that does not obligate the creditor to take the other person off the account, and they have every right to come after either or both of you for the full amount. For that reason, whenever possible, if people divorce it' best to require that debts be paid off, for example from the proceeds of the sale of the marital residence, or at least refinanced in only the name of the responsible party.

[JudyKayTee]

Your Separation Agreement does not control this loan. If you were the co-signer you are still responsible. The collection agency is totally within the law in trying to collect with you. The statute to collect, however, may have expired. When was the last activity on the account (payment or use of the l/c) and what State are you in?

My suggested would be to take your "ex" back to Court for contempt in not meeting the terms of the agreement. However, there may be little the Court can do to correct the situation.

As I said, it's a joint debt, he has defaulted and how it's your problem.

When you say he has "claimed" bankruptcy, do you mean he has, in fact, filed? You can file a letter of protest with Bankruptcy Court. By law if this is a joint debt you must be notified of the bankruptcy and the type of bankruptcy.

[trollmac]

Thank you both for you responses. I am in Ontario. I only found out about the bankruptcy through the collection agency when they called. They are not allowed to contact him anymore.

[trollmac]

Sorry, JudyKayTee, I didn't answer your question regarding how long this has been outstanding. The only formal notice I received that the account was in arrears was May 4, 2009. I am not sure of the date of the last payment he made. He told me he was paying what he could, but he also told me he had taken me off this line of credit.

[JudyKayTee]

You, in turn, have the right to go back to family court as your husband should not have included this debt in the bankruptcy, given that he had a separate court order from that court to pay the debt. However, the difference is between you and your ex, not you and the creditor.

I suggest you pay the debt and also go after him to repay it to you via a garnishment of wages. Otherwise they may sue you, ruin your credit, etc..

This is incorrect in my State, NY. I am not certain where you are but Bankruptcy Law is Federal Law. A person filing in Bankruptcy is required by law to list all debts. The husband has an absolute legal right and obligation to list the debt. If he omits it another creditor can come back and attempt to set the Bankruptcy Petition aside.

In fact the line of credit is now a debt he owes to both his "ex" AND the bank.

Her chances of collecting from him? Might very well be slim to none if the local Court takes the position that his responsibility was discharged. Is it worth an attempt? Certainly. Is there a guaranteed result? No.

Should she pay it? Of course - it's turned into her debt.

[JudyKayTee]

Sorry, JudyKayTee, I didn't answer your question regarding how long this has been outstanding. The only formal notice I received that the account was in arrears was May 4, 2009. I am not sure of the date of the last payment he made. He told me he was paying what he could, but he also told me he had taken me off of this line of credit.

The Statute is two years in Ontario. That means the creditor has two years from the last activity - payment OR use of the line of credit - within which the creditor has to sue or the claim is "dead."

The fact that it was in arrears doesn't mean, of course, that he didn't make payments after that date.

You have several things to consider (as pointed out above) but at this point I would ask the collection company for information on payments. Hopefully they will furnish you the information concerning payments/use of the line of credit without a lot of fuss.

Ultimately this is your debt. The question is what works best for you in attempting to get out from under it.

I am always upset when I hear of these unfinished "ends" to a divorce - an Attorney should have been a LOT smarter when you divorced, should have protected you from something like this happening. You undoubtedly gave up assets in exchange for the payment of this line of credit. You lost, your "ex" won in this category.

[dontknownuthin]

Thanks for the correction Judy - do you know, was he under any obligation to advise the bankruptcy court that he was under a standing order from another court to pay this debt as part of his marital settlement agreement? It seems he should have to disclose this.

[JudyKayTee]

Thanks for the correction Judy - do you know, was he under any obligation to advise the bankruptcy court that he was under a standing order from another court to pay this debt as part of his marital settlement agreement? It seems he should have to disclose this.

No problem - he has to list co-signers. From what I can read, no, he had no obligation to advise Bankruptcy Court that he was ordered to pay the entire debt. The Court Order making him responsible is meaningless to Bankruptcy Court (unfortunately) and the creditor.

I agree - it would seem that this should be covered in some way but because it's pretty much an unenforceable order if he files in Bankruptcy I can see that it's not required.

I am questioning if whether following the bankruptcy the ex-wife could file against "him" either for contempt of Court (for ignoring the Court Order) OR for the debt. On one hand the debt is taken out of his hands and put in hers; on the other hand if the debt is discharged in Bankruptcy does it become a NEW debt if/when she pays it?

It would seem that a contempt motion would get her nowhere. It's too late now to rearrange whatever division was made of marital property all those years ago. But would the Court order him to pay the dollar amount, irrespective of the Bankruptcy, stating that it's obligation to her? He, in theory, could have handed her X dollars in settlement OR paid X dollars on this line of credit. Do you know what I mean?

Off to do some research - if you beat me to the answer, please post it.

[dontknownuthin]

The other thing I'm wondering is if a debt is discharged in a bankruptcy, can they yet go after the cosignor or do they have to make an argument that it cannot be included because there is a co-signer not included in the bankruptcy? In other words, once someone files for bankruptcy, the creditor is supposed to write off the debt - doesn't the debt have to be excluded from the bankruptcy in order for them to continue to pursue it? Seems wrong to me.

[JudyKayTee]

The other thing I'm wondering is if a debt is discharged in a bankruptcy, can they yet go after the cosignor or do they have to make an argument that it cannot be included because there is a co-signer not included in the bankruptcy? In other words, once someone files for bankruptcy, the creditor is suposed to write off the debt - doesn't the debt have to be excluded from the bankruptcy in order for them to continue to pursue it? Seems wrong to me.

No, ALL debts have to be listed. If the debt is not listed the co-signer who filed is still responsible for it. When listed the creditor (when there is a co-signer) doesn't "write off" the debt. The creditor loses the ability to pursue that particular person. That does not extend to the co-signer.

[trollmac]

I am not sure now whether he has claimed bankruptcy or file a "proposal". What is the difference??

[JudyKayTee]

In one instance he's thinking about it and it sounds like he's offered some sort of payment plan which the creditors may or may not accept. I'm not sure he's talking about a proposal approved by Bankruptcy Court or some other not-for-profit (or profit, for that matter) agency.

You don't claim bankruptcy. You file a Petition in Bankruptcy Court.

Ask him - it matters to your financial future.

[trollmac]

"Working" with the collection agency to come to a settlement with CIBC on this matter now. They are asking for financial information and a copy of my pay stub. Really hesitant to be giving this information. Should I? Or should I try to talk to CIBC directly on coming to a settlement?