There are a few important places to start when inquiring about dividing debt in a divorce. Here are a few questions that will be answered to get you started.

What is marital debt? Is the state that the couple was married in a community property state or an equitable division state? Lastly, how does the courts differentiate between separate debt and shared debt? All of these topics are discussed in depth below.

What is Considered Marital Debt?

Marital debt is the debt that is acquired during the marriage by the two parties, such as joint accounts, credit cards, co-signed loans and joint tax returns. These are the responsibilities of both spouses. 

In a few states, known as community property states, both names do not have to actually be on credit card to still be considered marital debt. Instead the debt, typically, needs to be acquired during the marriage. However, it is not always this simple and the laws vary among the states. So it is best to check with an attorney to see what your jurisdiction specifics are.

What is Community Property and How Does It Affect Marital Debt?

Community property is all assets, property and debt acquired during the marriage, regardless of how it is labeled, who purchased it and who’s name it is in. The following are the nine community property states, all other states are equitable division states: Wisconsin, Louisiana, Arizona, California, Texas, Washington, Idaho, Nevada, and New Mexico. 

In community property states everything acquired during the marriage will be divided between or be the responsibility of the parties following a divorce, this includes all marital debts. Thus, if the spouse co-signed on a loan for the other spouse, after the divorce the co-signing spouse is still responsible to the creditor as a secondary payee on the loan. 

Therefore, if the spouse that is responsible for paying the loan stops paying the loan, then the creditors are able to come after the cosigning spouse. This loan can affect both parties credit scores if not paid.

Essentially, anything that falls within the category of community property is shared debt that both parties are equally responsible for. It is important to point out that even bank accounts that are held separately by the parties might still fall within community property. 

For example, if the funds were commingled throughout the marriage then it would be considered community property. Meaning, if the source of the money in the account came from shared assets, investment, or any financial income that was beneficial to the marriage.

Keep in mind that debt can also be assigned when the divorce is finalized. The court can determine if the debt needs to be paid by both parties depending on what was mentioned above as well as the circumstances surrounding the debt. Remember, always contact an attorney to find out what laws apply to your situation. 

What is Equitable Division?

Equitable division is the process courts use to divide assets, property and debt as fairly as possible during a divorce. Unlike community property states, an equitable division state will split the debt fairly, or assign the debt to the party it was created by. 

With equitable division there is still marital property that can create shared debt in the divorce however, there is a distinction of separate property belonging to one spouse, which creates separate debt. 

How Does Equitable Division Affect Student Loans Debt?

Student loans debt can be tricky during a divorce. In an equitable division state if both spouses entered onto the marriage with separate student loans, then they are more than likely to leave with their own loans. However, in some cases even though student loans may have been created by the ex-spouse, depending on how long the parties have been married the court will consider the circumstances and order the other spouse to pay a portion. 

For example if a couple was married for 25 years, and one spouse was a home-make/stay at home parent for the first 20 years then later goes back to school, then the spouse may be unable to take out a student loan without the working spouse co-signing. 

During the divorce proceeding, the court may assign a portion of the student loan debt created by the former homemaker to the spouse who is well set in their career. Why? The courts will often look at a spouse taking on student loans, especially if it is to advance a career or to find a paying job, as something that the spouse is doing for the benefit of “the community” (a.k.a. The marriage). Of course, there are many other reasons than just for the benefit of the community, and your lawyer can help you figure out which one applies to you.

How Can I Avoid Debt From My Divorce?

It is important that you do not take steps to try to actively avoid your spouse’s debt. If you have debt that was accumulated during your marriage, then it is likely to be unavoidable unless you and your spouse are able to come to an agreement. Doing things like hiding assets, removing your spouse from accounts, or cutting them off to money can make it more difficult for you in the long run. 

It is important that you and your spouse are able to maintain a cordial and positive relationship, even while you are going through something like divorce. If both parties are interested, then you should attempt family mediation in order to make it as fair as possible. 

A qualified divorce lawyer will be able to help you figure out how to divide your marital debt in a way that makes both parties happy. 

Do I Need an Attorney for Marital Debt?

It is in your best interest to hire a divorce lawyer for the division of debt due to a divorce. As divorce is a complex matter and is best left in the hands of a family law attorney. Before you take the steps to file for divorce, or if you already have, be sure to contact a divorce attorney to get the help you need.