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What happens to debt in a divorce?

Updated: Sep 25, 2020

It's very common for divorcing parties to have at least some credit card debt when divorcing and it's important to know how this may affect your future. Let's look at some different scenarios and how they can be handled:

One spouse has all of the credit card debt in their individual name. This can be common if one spouse was the primary shopper of the relationship or had a better credit score. Just because debt is in one party's name does not mean that the other person is not responsible for the debt in a divorce, especially if the debt was accumulated in maintaining the household, such as buying groceries or furniture. During the divorce, the debt must be divided up. Sometimes this means that the spouse that has more debt may get more property to offset the cost of the debt, sometimes that party may get more of the retirement accounts.

Both spouses have debt in joint and separate names. Since any debt that was incurred during a marriage should usually be split equitably, this scenario will sometimes involve listing what debt both parties have and then equalizing out the amount of debt each party will be responsible for after they are divorced.

What if one spouse did not know about the debt? This happens more often than you'd think. It is common for one spouse to incur debt without the other spouse being aware. This can happen if one spouse has a shopping or gambling issue, it can also happen if there is not enough money to provide for the household and a spouse takes out a credit card to buy groceries or other necessities.

What about student loan debt taken out during the marriage? Most student loan debt is usually used to cover tuition and books for schooling and if that is the case, that debt remains the responsibility of the person that received the benefit of the education. However, if any of the student loan debt was taken out to support the household while the parties were married, that portion of the debt may be the responsibility of the marriage and equitably divided in divorce. If you have this situation, it's important to be able to distinguish how much of your loan went to tuition and how much was deposited into your bank account to support the family.

What if we can't pay the debt? Money is a huge stressor and is often a reason that marriages can breakdown. If you are still married, it's important to remember that filing for bankruptcy is always an option to provide relief from debt. Most people do not lose anything when they file, so this can be an excellent option for couples or individuals with large amounts of debt. So long as you are still legally married, you can file a bankruptcy case jointly. If you are divorced, you can always file a case on your own. Always meet with an attorney to discuss your financial options.

Attorney Allison Greenlee Korr handles cases in Kalamazoo, Battle Creek and all surrounding counties, call today for a consultation. 269-381-4471


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