Marital debts are part of a marital estate

On Behalf of | May 30, 2024 | Divorce |

People who are going through a divorce have to consider how they’re going to divide everything they’ve amassed during the marriage. While most people focus on who’s going to get which assets, they also need to consider how marital debts are going to be divided.

While these debts have to be split up, creditors don’t have to abide by a divorce order. Instead, they can still hold both parties liable for debts that were established as joint accounts if/until a debt is transferred to one party’s name only. This is because the creditor isn’t a party in the divorce, so they aren’t bound by the terms of a property division order.

How are debts divided?

Debts should be divided in a way that’s considered equitable. In some cases, these are used to balance out the assets as they’re divided. It’s important to ensure that one party isn’t responsible for all the debts while they don’t get any of the assets.

Some spouses utilize mediation to come up with these terms, but others have to count on the court to outline who is going to pay for what. One special consideration is the presence of a prenup because terms related to debts might be included in this agreement.

What happens if someone doesn’t pay what they’re ordered to pay?

The most immediate consequence of one party failing to pay is that the credit report of both parties will be impacted. It might be possible to return to court to address the nonpayment, but damage may already be done.

How can these issues be avoided?

Some people can avoid the possibility of having their credit ruined by liquidating assets to pay off their debts. This gives each party a fresh financial start without having to worry about how they’ll pay the debts or whether their ex is going to pay for them. Others can transfer debts owed to each party’s name individually, to better insulate themselves from the risk of their former spouse tanking their mutual credit.

It’s critical for anyone who’s going through a divorce to understand their options and how they may impact their future. It’s important to think about the big picture when you’re in this position, so remember that debt division is only one component of property division. Seeking legal guidance can help you develop a broader property division strategy if you’re starting to navigate the divorce process.