Division of Debt in Divorce: Avoiding Unpleasant Surprises

Divorce Lawyer

Dividing assets when divorcing is an extremely common concept for most people. However, what many do not realize is that there are certain debts that must also be divided between the spouses. It would be unethical in the extreme for some debts to be shunted onto one spouse when the proceeds of that debt were used by both spouses.

Debt as “Marital Property”

Before marriage, two people have their individual property that they own. Once they get married, however, any property accumulated (with rare exceptions) is referred to as “marital” property – that is, owned by the couple. Thus, if a divorce occurs, these assets must be distributed fairly between the two spouses.

The general rule is that marital property is divided equitably (fairly, not necessarily equally) between the spouses. Most of the time, this refers to assets. However, debts incurred during the marriage are part of the ‘property.’ This holds true even if the debt was incurred by only one of the parties – it is still property of the marriage if it was incurred during the marriage, with marital assets.

There are, however, exceptions to this rule. Some debts are classed as dissipation on the part of one spouse, which means that spouse spent money solely to benefit themselves, usually motivated by grief and/or spite. The person who incurred those debts will be exclusively responsible for them.

Assigning Debt

On rare occasions, a spouse may be assigned a debt that he or she did not incur. Most states are “equitable distribution” states, meaning that generally, the spouse who receives more assets or makes more in salary might be assigned more of the marital debt, simply because of a better ability to pay. Rightly or wrongly, this assignation sometimes means that a spouse will refuse to pay (or be unable to pay) a debt incurred either by the couple, or by their ex-spouse. If this happens to you, you have one major ally on your side if you are the spouse being hounded for money: the family court.

For example, say your spouse is given the mortgage payment as part of his share of the marital property. If he is unable to pay, the bank may come after you, given that the mortgage is in both of your names. You can petition the court to enforce the divorce decree – then, your spouse must either pay or provide a compelling reason why he cannot. However, by the time this occurs, your credit may already be in dire straits.

Be advised that sometimes credit issues for you or your ex-spouse may lead to bankruptcy down the road. If your spouse files for bankruptcy, it may affect you (or vice-versa), because some debts you both owed will then be your sole responsibility. A creditor cannot legally collect from a bankrupt debtor, but they may try to collect from the non-bankrupt debtor, even if the debt was assigned away from you in the divorce.

Get a Knowledgeable Professional on Your Side

If you and your spouse’s assets and debts are hopelessly tangled, a competent asset distribution attorney may be your salvation. An experienced divorce lawyer in Frisco, TX is ready, willing, and able to help you sort out your affairs in a way that benefits everyone. 
Thanks to Scroggins Law Group for their insight into family law and debt division during divorce.