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How Are Debts Allocated in a Divorce?

While it is important to consider how the division of assets impacts a divorce, debts are also a major consideration. Debts that are incurred during the marriage must be equitably divided between the parties. The court will look at the source of the debt and the ability of the parties to pay. After examining these factors, the court determines an equitable distribution of the debt. For instance, the obligation to pay off a loan on a vehicle awarded to a husband would become his responsibility.


The mortgage on the marital residence is often the largest debt of the parties. Since the couple cannot split the physical marital residence in half, typically only one person takes the marital residence, or both parties decide to sell the residence. If one party takes the marital residence, they would usually refinance to remove the other party’s name from the mortgage. If the home is to be sold, then the mortgage is typically paid off via the sale of the home. The parties must determine how to split the mortgage payments until they sell the home.


What about credit card debts or personal loans not secured by an asset? Credit card debt and personal loans qualify as “unsecured” debt because there is not any collateral. It is typical during the discovery process to collect information about the debts, including copies of monthly statements. Occasionally, one party has no idea about the credit card debt or loans of the other party. Debts incurred during the marriage, regardless of the name on the account, qualify as marital debt. That is, unless one party presents evidence that the debt did not benefit the marriage. This would include things such as trips with a paramour or gambling debts.

It is simpler to assign debt in separate names to the named party and balance out any inequalities with other assets. As for joint credit cards or loans, the parties would ideally use marital assets to pay off the joint debt. That is not always possible or preferable. If the court assigns the obligation of a joint debt to one party, it is important to include a timeframe within which the party will pay. It is also preferable if the responsible party can transfer the debt on a joint credit card or joint loan to one in his or her name and close the joint credit card or loan account.

Debts, like assets, are distributed between the divorcing couple through the marital dissolution agreement. It is important to note that credit card companies or lenders for personal loans are not bound by marital agreements and can seek repayment from anyone liable on the debt.


The bottom line is that the court must allocate debt in a divorce. If it is a joint debt, both parties remain potentially liable until paying the debt in full. If the final divorce decree requires one party to pay, the court can enforce the terms of the divorce decree with the contempt powers of the court. However, the best course of action is to pay or transfer joint credit cards to the responsible party. This way, both parties can avoid future litigation.