What You Need to Know About Divorce & Debt

Posted on May 26, 2017 01:13pm
What You Need to Know About Divorce & Debt

Divorcing couples often worry about who will keep the house or the car, but not everyone is prepared to handle debt negotiations. Many American couples have debt of one kind of another, whether it be student loans, a mortgage, credit card debt, or money owed in a lawsuit. When a couple divorces, their debt is handled much like any other property, and divided based on obligation and ownership, ability to pay, your incomes, and spousal and child support.

How is Debt Divided?

Dividing debt in divorce is handled much like a division of property, in that the owner of the debt must first be determined. To do this, the courts will determine which debts are considered community debts (shared by both spouses), and which debt is separate (individually owned). When determining this, timing is one of the most crucial points. If you acquired debt prior to your marriage, you will almost definitely be held responsible for that debt. However, dividing debt acquired during the marriage can be much trickier.

Who is Liable for Debts in a Divorce?

When deciding who is liable for certain debts, it is important to know what type of debt you are dealing with.

  • Contract debt involves anything with a contractual agreement, such as credit cards, loans, and mortgages.
  • Tort debt is a legal debt, such as money owed after a car accident lawsuit.
  • Statutory debt is any payment assigned by the state, like child or spousal support, or taxes.

When dealing with communal contractual debt, such as the mortgage for the house you lived in together, debt is usually divided as equally as possible. After the divorce, either one spouse can purchase the home from the other, or the house can be sold to pay off the mortgage, and the remaining profit will be divided equally between each party. Credit card debt is also considered communal debt in most cases, and thus is divided equally between spouses. Dividing tort debt typically depends on the details of the situation on a case-by-case basis.

Factors the Court Will Consider

If you can prove a credit card was solely used by and for one spouse’s gain, that spouse may be held responsible for it entirely.

Courts will also consider who benefited from the debt. For example, if one spouse took out student loans during the marriage, leading to an increased family income, both may be held responsible for repayment because the education benefited both spouses.

Additionally, debt division will depend on each spouse’s income, and who is also being asked to pay any statutory debt, like child support.

There are many different factors to consider when dividing debt in a divorce, so the best thing to do is seek one-on-one advice with an experienced divorce attorney. Contact McKinley Irvin in Oregon to discuss your debt with our divorce lawyers.

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