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Debt and Divorce

| Jul 17, 2017 | Uncategorized

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A common issue that people wonder about when going through a divorce is, “what will happen to the debt?” Debt division is an extremely important issue, especially because the individuals involved are going from a joint dependent marriage to being independent individuals. It can be extremely difficult for a newly single person to adjust to the new lifestyle. It will especially make the situation more difficult if there is debt involved. Outstanding bills is a factor that determines a couple’s net worth. The most ideal thing you could do is to pay off any debt before filing for divorce, but this isn’t always possible obviously.
The most critical factor in determining the division of debt is applicable state law. The laws vary, so it is recommended that you check up on your state’s laws. Most states are “common law property” states, which means debts in the name of one spouse remains the responsibility of that spouse alone after divorce.
There are exceptions to this though, even if your state is a “common law property” state. This may include debt that occurred for family necessities and for living expenses. This could be the cost of groceries, housing, utilities, or tuition for children attending school. These are considered joint liabilities.
Usually in common law property states, the judge will divide the debt. He or she may take into account different scenarios such as one individual involved running up credit card debt. Especially if this was without the knowledge of the other party involved. The judge may consider the length of the marriage, the financial situations of both parties involved, and how their financial situation has changed prior to the marriage in comparison to now.
There are other states that are considered “community property states”. These states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. In these states, any debt that was acquired by either party during marriage are jointly held. In states like these, debts that occurred before marriage by one spouse do not become the responsibility of the other.
You may be wondering if the laws are any different for same-sex marriages, domestic partnerships, or civil unions. The laws are generally the same in states that allow these relationships, but only in the states where these relationships are viewed as equivalent to marriage.
According to Legal Zoom, “not surprisingly, in community property states, since most debts are jointly owned, a creditor can generally go after joint property and income to cover such joint debts.” In most common law property states, joint property may be seized for debts that occurred for family necessities and living expenses. Debt held by one spouse does not usually entitle a creditor to go after a joint property though.
“Another consideration may be if real estate is held in “tenancy by the entirety,” which means that each spouse owns the undivided whole of the property. “
If a couple has a prenuptial agreement, that includes a provision for debt division upon divorce, its terms will be upheld by the court.
If you still have questions, and are in of legal advice from a lawyer, Palacios Law Group is always here to help. We are the experts at family law and divorce.