Couples who divorce generally have accumulated joint (marital) assets as well as debts. A significant part of the divorce process is determining how to divide those. While much attention is given to division of assets, how you divide your debt with your spouse can have just as much, if not more, impact on your financial future moving forward.
Community Property vs. Equitable Distribution States
What the law says about division of marital debt depends on where you live. In the nine "community property" states (Arizona, Nevada, New Mexico, California, Washington, Idaho, Wisconsin, Texas and Louisiana), both spouses are responsible for all debts that were accumulated while the couple was married. That is the case even if only one spouse was responsible for the debt -- such as with an individual credit card.
Most states are "equitable distribution" states. This means that spouses can only be held responsible for debt that the couple accumulated together. This could include being joint signers on a mortgage, auto loan or credit card.
Developing a Strategy for Dividing Debt
Family law attorneys and financial advisors can help people getting a divorce work out the best strategy for separating themselves from joint debt and determining responsibility for paying it off as soon as possible. If you keep your name on a debt, such as a credit card, even if your spouse agrees to pay it off, you can be held responsible for it if he or she does not. As far as the credit card company is concerned, you both are still responsible for the account. If it goes unpaid or payments are late, your credit score could be impacted. Your only possible redress would be to take your spouse to court if he or she agreed in the settlement to share responsibility for the debt and neglected that responsibility.
What About Debt Accumulated After Separation?
Some spouses continue to accumulate joint debt after they've separated, but before their divorce is final. Responsibility for that debt depends on what state you're in. Debts accumulated separately after a couple has separated are considered differently than marital debt. However, it's essential to know what your state considers your official separation date.
Your family law attorney will be able to provide advice regarding your debts based on your individual situation, how responsible your spouse is and the laws of your state. Ultimately, you want a fair distribution of both assets and debts. Your attorney will help you work to get that.
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