Dividing Debt in Divorce: Who Pays What?

When couples divorce, they must divide not only their assets but also their debts. In many cases, debt division is even more contentious than property division because nobody wants to be stuck paying more than their fair share. This guide explains how marital debt is divided, how to protect yourself, and what creditors can and cannot do after your divorce.

Marital Debt vs. Separate Debt

Just like property, debt is classified as either marital or separate:

• Marital debt: Debts incurred during the marriage for the benefit of the family, regardless of whose name is on the account
• Separate debt: Debts incurred before the marriage or after separation, and debts related solely to one spouse's separate property

The same state rules that govern property division generally apply to debt division. Community property states divide marital debt equally, while equitable distribution states divide it fairly based on various factors.

Common Types of Marital Debt

Mortgage Debt

The mortgage on the family home is usually the largest marital debt. Options include selling the home and using proceeds to pay off the mortgage, one spouse refinancing solely in their name and keeping the home, or continuing to co-own the property temporarily. If one spouse keeps the home, they should refinance the mortgage to remove the other spouse's name and liability.

Credit Card Debt

Credit card debt incurred during the marriage is generally marital debt, even if only one spouse's name is on the account. However, charges for clearly personal expenses unrelated to the family, such as gifts for an affair partner, may be assigned solely to the responsible spouse.

Auto Loans

Car loans are typically assigned to the spouse who keeps the vehicle. If possible, refinance the loan into only that spouse's name so the other spouse is no longer liable.

Student Loans

Student loan treatment varies significantly by state. Some states consider student loans separate debt because the education benefits only the borrower. Other states may divide student loan debt incurred during the marriage, especially if the family benefited from the resulting career advancement.

Medical Debt

Medical debt incurred during the marriage is generally considered marital debt, even if only one spouse received treatment.

Tax Debt

If you filed joint tax returns, both spouses are generally liable for any resulting tax debt. This remains true even after divorce. The IRS does offer innocent spouse relief in certain circumstances. Understanding the tax implications of your divorce is critical.

How Courts Divide Debt

In addition to the general property division rules, courts consider several factors specific to debt:

• Who incurred the debt and for what purpose
• Who benefited from the debt
• Each spouse's ability to pay
• Whether either spouse ran up debt in anticipation of divorce
• The overall balance between assets and debts assigned to each spouse

Protecting Yourself from Your Spouse's Debt

1. Close joint accounts: Close all joint credit cards and lines of credit as soon as possible after separation
2. Monitor your credit: Check your credit report regularly for new accounts or charges
3. Document everything: Keep records of all account balances as of the date of separation
4. Get it in writing: Ensure your settlement agreement clearly specifies who is responsible for each debt
5. Refinance joint loans: Transfer joint debts to individual accounts whenever possible

Important Warning About Creditors

Your divorce decree does not bind creditors. If your spouse is ordered to pay a joint credit card but fails to do so, the creditor can still pursue you for payment. Your legal recourse would be to go back to court to enforce the divorce decree against your spouse, but the creditor can still report the delinquency on your credit. This is why refinancing joint debts into individual accounts is so important.

Debt division can be one of the most complex aspects of divorce. If you have significant debts, consider working with a mediator or collaborative divorce team to develop creative solutions that protect both parties. Gathering your financial documents early makes the process much smoother.