Debt Assignment During Divorce

Most individuals have some debt, whether it's in the form of car loans, credit cards, payday loans or mortgages. If you’re married, you may have more debt than you realize. Your spouse might have accounts that you’re not even aware of. If he opened them while you were married, and depending on the laws of your state, you might be responsible for paying back a portion of them if you divorce.

Community Property States

Ten states are community property states: Washington, Nevada, California, Alaska, Wisconsin, New Mexico, Idaho, Arizona, Texas and Louisiana. In Alaska, however, a couple must intentionally elect to have their assets and debts treated as community property. In the other community property states, all debts either of you incur during your marriage are the responsibility of both of you, regardless of whose name is on the account. If your spouse takes out a credit card and runs up a $5,000 balance, the law holds you equally as responsible for paying it off. If you divorce, a court will generally assign 50 percent of all marital debts to each of you.

Equitable Distribution States

All other states follow the laws of equitable distribution, also sometimes called common law. In these jurisdictions, you may or may not be responsible for debts incurred by your spouse, depending on the circumstances surrounding each of them. Equitable distribution laws allow a court to weigh the factors involved with a debt and decide which spouse should be responsible for repaying it. Courts base equitable distribution on what seems fair. If your spouse signs for an account that you have no knowledge of and that you never used, a judge would most likely assign it to him for payment. An exception might exist if he used the borrowed money toward something you both enjoyed, such as household furnishings. In this case, a judge might hold you partially responsible for repaying the debt, but he would not necessarily assign you 50 percent of it unless your incomes are roughly equal.

Separate Debt

No matter where you live, debts you bring into a marriage are rarely assignable in a divorce. Examples include student loans you took out before you were married or child support and spousal support obligations resulting from a previous marriage or relationship. These generally remain the separate debt of the spouse who initially incurred them in both community property and equitable distribution states.

Tips

After you’ve made the decision to divorce and especially when you separate, “freeze” all your credit accounts so the balances are reflective of debt actually incurred during the marriage, not after you parted ways. You can usually accomplish this by notifying the lenders by certified mail that you’re divorcing and wish to close the account. If you don’t do this, you might find yourself partially responsible for charges your spouse runs up pursuing a single life after your separation, especially in states where the date of divorce rather than the date of your separation is the cut-off for sharing marital debts.
Although your state’s laws will assign marital debt between you if a court has to decide the issue, you always have the right to reach an agreement on your own. Unless it is grossly unfair, even judges in community property states will usually honor it and include it in your divorce decree.

References

• Nolo: Dividing Property and Debt During Divorce FAQ
• DivorceSupport.com: Property and Debt
• Nirenstein Garnice; Debts in Divorce: Division of Marital Debt in Arizona; Marc Brown; March 2011
• Davis Law Firm: Division of Marital Debt in Alabama
• Bankrate.com: Community Property, Common Law, Assets and Debts; Jay McDonald
• Nolo: Debt and Marriage – When Do I Owe My Spouse’s Debts?