With all the focus on division of property in divorce, an important aspect often gets looked over. Where does the marital debt go? Marital debt will be subject to division just like the assets. From mortgages to credit card debt, someone will be responsible for taking on the repayment of these debts assumed during marriage.
If you cannot agree to who will assume debt that has accrued during the marriage, the trial court will do so for you. Factors to consider during this process will vary between states, but often, the court will consider:
- What was the purpose of the debt?
- Did one spouse or another incur the debt? Who was responsible for taking on the debt?
- Which spouse benefited from assuming the debt? For example, if the debt was a car loan, the court would look to see who drives that car?
- Which spouse is best able to repay the debt? One spouse may be in a better financial situation to have the ability to consistently make payments on the debt?
The trial court will use the answers to the questions above to attempt at dividing the marital debt in the best was possible. It is important to note that only marital property will be subject to division. Debt incurred prior to the marriage will stay with the spouse that brought the debt into the marriage, with some exceptions. Sometimes a spouse will assume responsibility for the other spouse’s debt for credit and other reasons. This may lead the debt to be included in the marital debt evaluation. Generally speaking, however, marital debt includes those debts incurred by either spouse individually or both spouses jointly during the marriage. This means that any debt incurred from marriage up until the date of the final divorce hearing is considered marital debt.
The fact that any debt taken on during the divorce process will still be considered marital debt may be disconcerting to many. Malicious or simply irresponsible spouses may try to put you in a bad financial situation by assuming as much debt as possible during divorce proceedings. If you have a valid basis for these fears, you may request that the court order certain spending restrictions, including:
· Making high risk investments
· Spending money for the sole intention of harming you
· Over spending or frivolous spending
· Excessive gambling.
If you are considering divorce or are beginning the divorce process, be mindful of all of the above. Division of debt, just like division of property, can have substantial and lasting impacts on your finances. Additionally, and this is very important, remember that while the court may order who will be responsible for paying a specific marital debt, you can still be held responsible by the lender should your former spouse fail to make the required payments. A creditor may go after either spouse when payments are not received. Some states even have a stipulation in divorce decrees that states each party acknowledges that assignment of responsibility for paying a debt incident to the divorce does not necessarily change the creditor’s ability to go after either spouse for a debt owed.