Division of Debts
What does Division of Debts mean?
The division of debts following a divorce may be similar to the division of property and will vary based on the state in which you live and whether that state is considered a community property state or an equitable distribution state.
Community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Puerto Rico is also a community property jurisdiction, and Alaskan couples may opt-in for community property. The remaining forty-one states are equitable distribution states.
In community property states, generally speaking, all debts incurred during the marriage are the responsibility of both spouses, regardless of who actually signed or co-signed the loan. For example, if your spouse decides to buy a car but you did not go to the dealership and co-sign the loan, you remain responsible for the debt payments.
In an equitable distribution state if both spouses have signed for the loan, they are considered both responsible for repaying the debt. If one person incurs the debt and only their name is on the loan agreement, the debt will be considered their responsibility.
What about debt which precedes the marriage?
Debt which is brought into the marriage may be considered non-marital debt, and the spouse who incurred the debt may be responsible for repayment. In some community property states, under specific conditions, both spouses may be required to repay the debt.
Due to the complexity of divorce laws, it’s always a good idea to consult with a lawyer about the laws in your state and how your debts will be divided during the divorce. Legal experts generally will have suggestions about whether it is best to eliminate shared debts prior to finalizing the divorce or how best to divide debts so each person has a set amount to repay.
For example, if debts are transferred to your spouse for repayment, the courts may agree to offset their expense by giving them more property in the divorce settlement.