Dividing Debt in Divorce – WomansDivorce.com

By Tracy Achen 

At first look, dividing money owed in divorce appears fairly straight ahead for most individuals. In any case, it is normally normal process to assign sure money owed to every partner as a part of the divorce decree. If a pair cannot attain a mutual settlement when dividing the marital property, there are a two principal elements a court docket considers when dividing the money owed:

• Is the debt a marital debt or the separate debt of only one partner? 
• Does the couple dwell in a neighborhood property or equitable distribution state? 

We’ll focus on every of those matters, in addition to different issues to think about and find out how to defend your self when dividing money owed under. 

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Dividing Debt in Divorce – Marital vs. Separate Debt

The very first thing to think about when dividing the marital property is figuring out whether or not the debt is a marital or separate debt.

Marital debt is any debt that was incurred in the course of the marriage, no matter whose identify is on the debt. A mortgage for the household house bought in the course of the marriage is an instance of a marital debt, even when the mortgage is just in a single partner’s identify. Different issues that could possibly be thought of marital debt are automotive loans, financial institution loans, and bank card money owed that have been incurred in the course of the marriage.

Separate debt is any debt incurred earlier than the wedding or after a authorized separation. For instance, a pupil mortgage that was taken out earlier than the wedding would typically be thought of the separate debt of the one that took out the mortgage, until it was refinanced in the course of the marriage.

This brings up an vital level on how separate debt will be transmuted into marital debt. When a pre-marital debt is refinanced in the course of the marriage utilizing joint funds to repay the mortgage, it might then be thought of a marital debt.

How a court docket divides debt is determined by the place you reside. There are 9 neighborhood property states: AZ, CA, ID, LA, NV, NM, TX, WA, and WI. In neighborhood property states, typically all money owed incurred in the course of the marriage are thought of marital money owed. As such, the court docket will divide the money owed equally between the spouses, no matter who acquired the debt.

The remainder of the states are equitable distribution states. In these states, marital belongings and money owed are divided in an equitable method. This doesn’t suggest the court docket will break up the money owed equally, relatively the court docket will decide a division of debt that’s the most truthful and even. Some issues the court docket will consider in making this dedication are:

• who incurred the debt  
• the character of the debt 
• if each events benefited from the debt 
• the incomes capabilities of every partner 

If a debt was incurred solely by one partner and the opposite partner didn’t profit from the acquisition, this debt sill probably be deemed a separate debt and never divided between the spouses. For instance, a partner who runs up bank card debt facilitating a bootleg affair will typically be chargeable for the debt in a divorce.

Debt Legal responsibility in Neighborhood Property States

As if being answerable for joint money owed wasn’t dangerous sufficient, you additionally want to concentrate on how debt duty for particular person accounts is dealt with in numerous states. In neighborhood property states, each spouses could also be held answerable for all money owed incurred throughout their marriage. Which suggests the collectors can maintain you chargeable for reimbursement of your partner’s debt, even if you happen to have been unaware of the debt.

For those who dwell in a neighborhood property state, it’s vitally vital to have full monetary disclosure earlier than you begin negotiating your divorce settlement. This includes having an in depth itemizing of all money owed, together with account numbers, names on the accounts, and quantities owed on every account. You can begin gathering this info by taking a look at bank card statements and mortgage paperwork. It is also a good suggestion to order a replica of your credit score report to find out if there are any money owed you were not conscious of.

Here’s a actually good video discussing assessing debt duty in divorce:

Collectors Aren’t Certain by Divorce Decrees

Many divorced individuals have discovered the onerous method {that a} divorce decree does not change the contracts they made once they have been married. For those who collectively acquired a debt together with your partner, each of you might be equally chargeable for repaying the mortgage, no matter what your divorce decree says. Principally, agreements between you and your husband may have no impact on any agreements made with collectors.

Including an Indemnity Clause to Your Divorce

In case your partner will likely be chargeable for a debt after the divorce, it is advisable remember to add an indemnity clause to your settlement settlement. Worded correctly, this will provide you with grounds to take your ex again to court docket to be compensated for any cash you need to pay because of his defaulting on a mortgage. An indemnity clause may even provide you with means to have the debt eliminated out of your credit score report. It is best to focus on this matter together with your lawyer, particularly earlier than you signal the ultimate divorce papers. 

Defending Your Pursuits on Secured Loans

Irrespective of which state you reside in, do not permit your identify to be taken off property deeds or car titles in case your identify remains to be on the mortgage securing that asset. In case your partner will likely be preserving the house or car, it is advisable make sure that the mortgage is refinanced in his identify solely. Actually, it’s best to add a clause in your divorce settlement requiring the mortgage to be refinanced.

Sadly, what typically occurs is that one partner retains the home and the opposite indicators the quitclaim deed, however the mortgage isn’t refinanced. If the mortgage goes into default in a while, the harmless partner is held equally chargeable for the debt, however has no declare to the precise home.

The lesson right here is that you simply should not take away your identify from any deed or title in case your identify is on the mortgage. There’s nothing worse than having to pay for one thing you not personal. 

To seek out out extra in regards to the totally different features of dividing debt in divorce and get tips about find out how to defend your credit score, preserve studying: 

Up to date September 15, 2025