Dealing With Debt During Divorce

You have heard “till death do us part,” but what about “till debt do us part”? While it is common to think about how marital property will be distributed upon divorce, marital debts may also be divided among each spouse. This may include consumer debt, car loans, mortgages, student loans, and other forms of debt commonly held by working professionals.

Similar to property distribution, the division of marital debt depends on the specific facts of the divorce. In most cases, both parties are responsible for debt incurred during the marriage. However, there is a difference between marital debt and personal debt. How a debt is classified can determine who is ultimately responsible for it after divorce.

Understanding Marital Debt vs. Individual Debt

Similar to marital assets, marital debts are those which were accumulated during the marriage. Individual debts, on the other hand, are debts that were accumulated prior to the marriage by one spouse. 

It doesn’t matter whether or not the debt was incurred jointly or under one partner’s name for the benefit of the marriage - all parties are responsible for marital debt. Some of the most common matrimonial debt include:

• Mortgage debt
• Auto loan debt
• Medical debt
• Joint credit card debt

In many cases, marital debt can be repaid by selling marital property, such as selling a family home to repay the mortgage. However, if one spouse wishes to keep the asset, whether it be a home, a car or another valuable possession, the court may allow one spouse to withdraw from the loan agreement. However, both spouses are responsible for medical and joint credit card debt.

Individual debt, by contrast, is debt that was accumulated before the marriage. This could include credit card debt, student loans, a car loan, mortgage, or any other type of consumer debt. 

Reducing Debt Prior To Divorce

Debt can present a lot of issues for spouses who are seeking a divorce. One way that a couple can proactively tackle these issues is by reducing debt altogether. For example, spouses could work together to pay down credit card bills, pay off car loans, and tackle student debt prior to divorce finalization. By paying down marital debts, or eliminating them entirely, couples can make a clean break and start their lives post-divorce debt free.

Accumulating More Debt After Separation

Though it may seem counterintuitive, both parties are liable for the marital debt incurred by one party even after separation. That is why it is important to take steps to limit spending from the outset of a divorce. For example, one spouse could cancel a joint credit card to prevent the other from incurring more debt. A spouse could also order a credit report to check for any unauthorized purchases or loan agreements. However, the most effective way to end the accumulation of marital debt is to finalize the divorce.

Working With A Manhattan Divorce Attorney

Debt can be a challenging issue during and after a marriage. If you are considering a divorce, but have questions about how marital property and debt will be divided, contact our office today to speak with a Manhattan divorce attorney. We understand what you are going through, and we are here to help. Contact us online today to schedule your initial consultation.