Business Insider reported the average debt for Americans was $59,580 in 2023. Handling debt is a major consideration when it comes to divorce.
Dividing debts can be a complex task. This process can vary based on individual circumstances.
Marital vs. separate debts
The process must start with differentiating between marital debts and separate debts. Marital debts are those the couple incurs during the marriage for the benefit of the household or family. The law requires dividing these. Separate debts, on the other hand, are what a spouse incurs before the marriage or for their individual purposes. They often remain the responsibility of that spouse.
Negotiation and agreement
Couples can negotiate and agree upon how to divide their debts, either independently or with the assistance of a mediator. This can provide more flexibility and control over the process, allowing couples to find a solution that works for both parties.
In cases where couples cannot reach an agreement, the court may step in to determine how to divide debts. Courts will consider various factors, including the financial situation of each spouse, their ability to pay and the nature of the debt. The court also must follow the law when making decisions.
Even if a divorce decree assigns responsibility for a particular debt to one spouse, the divorce agreement is not binding for creditors. If both spouses signed the contract for the debt, the creditor can pursue either or both parties for payment. The bottom line is the divorce agreement does not remove legal obligations to creditors.
When dividing debts in a divorce, a couple must think about the long-term financial implications. The goal is not just to distribute debts but also to set up a plan that allows both parties to move forward without the burden of excessive financial obligations.