Are you planning to get divorced, but you and your spouse have debt? Chances are that you are not sure how this debt will be divided between the two of you. Here are some things you need to know about this important part of the divorce process.
Understand Marital Property And Non-Marital Property
The assets owned by you and your spouse will be classified as either marital property or non-marital property. Marital assets will be defined as anything that was accrued after the marriage began, regardless of whose name it is in. For example, any real estate bought after the marriage would belong to both people, regardless of if it was bought in one person's name. Meanwhile, property bought prior to the marriage would be considered non-marital property, such as a personal car that someone had before the marriage. The same rules apply to debt, with any debt that was accrued before the marriage belonging to that person after the divorce.
Understand How Marital Debt Is Divided
It is important to understand that each state has its own laws regarding how marital debt is divided, with it falling under either one of two categories. Your state may be a 50/50 state, meaning that all debt is split in half equally, regardless of who initiated the debt. Other states have equitable distribution laws, which use a variety of factors to determine how debt is split among a married couple getting divorced.
Understand The Factors Of Equitable Distribution
While there are many factors that go into dividing debt under equitable distribution laws, there are a few key things to keep in mind that can give you an idea of how it will happen. If one spouse is keeping the house while the other is not, it is common for that spouse to receive the majority of the mortgage debt that remains on the home, if not all of it. If one spouse greatly benefited from taking on a certain type of debt, such as a car loan or college loan, then that person will be more likely to receive the debt.
However, be aware that debts are still going to be a joint responsibility to pay off in the eyes of the creditor. If your spouse takes on the mortgage and cannot pay it, it could impact your credit. That's why it is recommended to pay off as many debts as possible before the divorce process starts, or to split the debts fairly based on each person's income level.
To learn more about divorce with debt, reach out to a local family law attorney.
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