It's safe to say that the debts a couple owes when divorce is looming can be a bit controversial. The way debts are divided depends on the state of residency and other marital issues like property divisions. To learn more about how marital debt is decided, read on.
Defining Marital Debt
Not everything a couple owes falls into the marital debt bucket. Anything that does make up marital debt is decided based on the laws of the state and other factors. The below forms of debt may not be marital debt, but it might be classified as separate debt:
- Debts already held by one party on the date of the marriage.
- Debts taken on by one party. These may or may not be considered marital debt, depending on the state of residency.
It's worth mentioning that couples can assign and agree upon any type of debt division they want. The judge will approve of a debt settlement in which both parties are in agreement if it does not appear to be unfair. When the couple cannot agree, however, judges will decide using state law and the totality of the marital settlement agreement.
Marital Debts in an Equitable Distribution State
Almost all states follow this model when deciding on debts (and on property, for that matter). Equitable distribution, in this case, can be construed to mean fair, and that is how the judge views marital debt. If a party has taken out an auto loan in their name only, they are likely to leave the marriage with that debt using equitable distribution. If you live in an equitable distribution state, make a list of all debts and then of separate debts to give to your divorce attorney.
Marital Debts in a Community Property State
Fewer states use this manner, community property, for dividing debts. California and a few others view debt as belonging to the community – the community being the married couple. That means the debt is owned 50/50 by each party regardless of who applied for the debt, who used the card or loan, and who the debt benefited. If you are divorcing in a community property state, plan ahead as much as possible to encourage your spouse to pay off their debts prior to the divorce or you might end up being responsible for some of them.
Further complications can arise as a result of joint debts and intermingling. Intermingling is when marital assets and debts are enmeshed in a confusing manner. Speak to your divorce lawyer to find out more.