While much of divorce advice is focused on the division of assets, it is equally important to understand how debts are divided during divorce. Generally, the debts will be divided equally, along with the assets. Each individual debt may not be split in half, but at the end of the day the total value of marital property that each party receives, minus the debts allocated to them, will usually be relatively equal.
Whose Debt Is It?
Generally, any debt acquired by one of the parties during the marriage will be the responsibility of the other partner as well. In a community property state, joint ownership of the debt is automatic when one partner acquires the debt during the marriage. In equitable distribution states, if both spouses have cosigned the debt and/or credit cards, then they will both be responsible for the debt. However, if only one spouse is responsible for the debt it may be assigned to them in the divorce. The reason each debt was incurred will be relevant. If the debt was related to household expenses, then it could be the responsibility of both parties. However, if one party took out a loan in their own name for a non-marital expense then the debt may be assigned to that party alone in an equitable distribution state.
Credit Card Debt
Many divorce attorneys will recommend that you pay off your joint credit card debt as part of the dissolution process if at all possible. That way you can move forward without credit card debt (and interest) from the marriage. Another reason to clear up your credit card debt before the divorce is so the credit card companies don’t come after you. Even if the credit card debt was assigned to your ex-spouse during the divorce, the creditors may come after you for the money if the other party defaults or declares bankruptcy. While you may be able to bring your ex-spouse to court later to collect the money that you have paid, it may be frustrating and costly.
After separation, the debts incurred by each spouse will be their own responsibility. This also includes the interest that the debts acquire during this period.
Medical Debt and Student Loan Debt
Once again, how medical and student loan debt will be divided in a divorce will depend on the state that you live in. In community property states, like with other debts, any medical debt from during the marriage will be the responsibility of both parties. If the parties were living apart when the medical debt was incurred, then the court may find that the debt is the sole responsibility of the person who needed the medical care.
With student loans, the court will look at who benefitted from the loans. If the student loans were taken out to pay for a degree that was acquired a long time ago, and the person who got the degree used it to find a job that supported the family, the debt may be split between the couple. However, if the spouse recently graduated and will be the primary beneficiary of their increased earning power, then the debt will likely be assigned to them as the benefits will be as well. All of these considerations can be very fact specific and will depend on the unique circumstances of the parties. An experienced divorce attorney can help you to understand what is likely to happen, and they can represent your interests in court or settlement negotiations.