What Happens to Debt During Divorce?

Michiganders may be somewhat less debt-prone than Americans in general, but nevertheless, we carry over $36,000 in debt per capita. That means most divorcing couples have to deal with not only property division, but also debt division - in most cases, tens or even hundreds of thousands of dollars' worth of debt.

If you're facing a divorce, the question of what happens to that debt is likely weighing on your mind. We're here to help you understand how the courts will answer that question.

Separate vs. Marital Debt

Woman with debts reviewing her monthly billsAs a rule, debt that was acquired before the marriage is considered separate debt. For instance, student loans you took out while you were single are most likely considered yours - and the same is true of your spouse's loans.

In general, the courts will treat any debt acquired during the marriage as shared, marital debt, regardless of whose name is on the account. For example, a credit card you opened after you were married will likely be considered marital debt, even if
only your name is on the card. Likewise, an auto loan for a car purchased in your spouse's name during the marriage is still considered marital debt.

There are a few fairly consistent exceptions to this rule:

  • Gambling debts are considered separate debt.
  • Anything spent on an extramarital affair is separate debt.
  • Money spent on legal fees in a criminal case is generally separate debt.
  • Student loans taken on during the marriage may be considered separate debt, depending on the circumstances.

During divorce proceedings, the judge will divide marital debts on the principle of fairness; that is, each spouse will be expected to pay a fair share. Usually, that means each spouse pays about half, but the court has some leeway to make an unequal division if the circumstances call for it. For instance, if one spouse is more at fault for the breakup of the marriage - perhaps due to having an affair - that spouse may be ordered to pay more of the debt. The courts will also account for each party's ability to pay and whether one spouse was more at fault for accumulating the debt.

Secured debts generally stay with the associated property. For instance, the spouse who keeps the house also becomes responsible for the mortgage.

Creditors and Debt Division

The tricky thing about debt division is that, while the court has authority over the divorcing spouses, it does not have authority over your creditors. This can create complicated situations. For instance, if your spouse is named responsible for a particular credit card debt in your Judgment of Divorce, but both of your names are on the credit card itself, creditors will still treat it as a joint debt. If your spouse subsequently misses a payment or lets the card go into default, your credit score will be affected, even though the debt is no longer your responsibility.

Debt division is one of several reasons why you need an experienced divorce attorney to make sure you are protected. It's very important to make sure every debt that is in both of your names is included in your Judgment of Divorce. That way, if your ex-spouse is ordered to pay a debt and doesn't do so, you can get the order enforced by the court. Likewise, if you end up needing to make a payment on a debt assigned to the other person, you can file a motion and get a court order instructing your ex-spouse to reimburse you.

At the Oliver Law Group, we help divorcing couples find fair and equitable solutions to their legal issues, including property and debt division. Whenever possible, we'll help you work out a settlement with your spouse that fairly divides both assets and debts, leaving less potential for legal battles down the road. Call today or contact us online to arrange a free consultation.

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