DURING A DIVORCE, WHAT HAPPENS TO A COUPLE’S DEBTS?

divorce

Definitely, to put it mildly. Separating assets and debts are inextricably linked when it comes to a divorce. If the couple has little assets, sharing obligations after divorce might be more important than dividing property.

According to Foothill Ranch Divorce Attorney, Depending on the regulations of the state where the separation is taking place, debts might be distributed in various ways. All marital obligations are owed by both spouses, regardless of whether their names appear on them or not, in community property states. While this is the case in certain areas, inequitably distributed states, each spouse is solely liable for debts recorded in their respective name.

There are several approaches to dividing debt in a divorce. Here are a few instances:

  • By Earnings: The individual with a higher income and who can better repay the debt may be given a larger share of the obligation by the court.
  • Who Stands To Gain From The Debt?: Debts may be divided according to who stands to gain or lose from the source of the debt. Because the spouse who lives in the marital home is directly benefitting from the debt, they are more likely to take the mortgage. Similarly, the principal driver of a car with an outstanding loan will most likely be responsible for paying off the debt.

Is Debt Handled The Same In Every State?

No. Whether a state is an “equitable distribution” or a “community wealth” jurisdiction affects how property and debt are divided after a divorce. In states with equitable distribution, the division of assets and liabilities is based on what a court deems fair in each instance. Equal does not necessarily imply “fair.” When it comes to community property states, the goal is to divide property and obligations equally.

You must keep in mind that every state has its unique divorce rules. As a result, the laws in one equitably distribute shape may differ from the law in another. The same is true for states with a concept of communal property.

What Is The Debt-Dividend Ratio In Equitable Distribution States?

Equitable distribution states (such as New Jersey) hold both spouses equally liable for debts accrued throughout the marriage, as is customary.

Couples may also have separate debts. This provision often covers obligations incurred before the marriage, and the spouse who first incurred them will be held solely responsible for them.

Just remember that a combined bank account, for example, might be used to pay down one spouse’s debt. Those who didn’t create the debt may now demand compensation for their part of the shared property used to repay that obligation. This might pose complications in divorce. It all depends on the specifics of each case and the divorce rules in your state.

If a spouse acquires a debt while living “separate and apart” (i.e., no longer having sexual intercourse with each other), some jurisdictions consider the debt distinct.

Even in the most unusual cases, a court may rule that one spouse is solely responsible for a debt accumulated during the marriage. Consider a scenario in which a husband has a sexual relationship and has racked up a huge credit card bill to pay for presents and costly vacations for the other person. Those credit card bills will most likely be exclusively the responsibility of the cheating spouse under upcoming divorce legislation.

Debt division is a delicate business, and the court must determine who bears the most burden. Again, fundamental fairness is at the heart of equitable distribution systems. There may be times when, for example, the court assigns one spouse a particular obligation because that spouse has a much stronger capacity to pay that amount.

Before Marriage, Who Owned The House?

Occasionally, the house to become the couple’s primary residence belonged to one of the partners before the marriage. Assuming the lodging is no longer part of the marital estate, the spouse who owned it before the divorce is entitled to it. A spouse might be entitled to compensation if the other spouse made any contributions that enhanced the home’s worth, such as renovation expenditures or assistance in paying the mortgage. In most divorce cases, the amount of compensation is stated in the judgment or decree.