Divorce proceedings require that people separate their finances. That process usually involves a carefully-negotiated division of assets and spouses sharing responsibility for certain debts. Financial obligations frequently become points of contention during divorce negotiations.
Spouses are likely to have strong feelings about how they address certain debts when they divorce. There are multiple different disputes that may arise during debt-related property division negotiations. People who are aware of these issues ahead of time can potentially prevent them from spiraling out of control and leading to a litigated divorce.
What disagreements do spouses often face when addressing their debts?
Challenges identifying separate debts
As is the case with property, some debts are marital, while others are separate. Marital debts are technically the responsibility of both spouses and have a direct impact on the property division process. Separate debts are typically the obligation of one spouse.
However, they can have a minor impact on property division proceedings if the spouses litigate. Judges may consider separate financial responsibilities, much like they consider separate assets when trying to establish equitable terms for property division.
The name on the account does not determine if the debt is separate or marital. When people took on the debt and the intention behind the debt matter. Debts people hid from their spouses, debts related to extramarital affairs and debts that may constitute dissipation may not be part of the marital estate.
Disagreements about responsibility
Frequently, both spouses want to limit how much debt they have to cover after they divorce. The people do not want to commit their post-divorce income to pay off credit card debts accrued while they were married.
People sometimes push for their spouses to take on as much debt as possible. While that can lead to temporary financial relief, this solution leaves the non-paying spouse in a difficult position.
If the spouse ordered to pay certain debts defaults or files for bankruptcy, the other spouse may be at risk of aggressive collection efforts. Spouses may need to consider various solutions for their debts, including trying to eliminate them by liquidating marital resources.
A review of household financial records with a skilled legal team can help people set reasonable expectations for the division of their debts. Learning more about the rules that apply during divorce can help people avoid unnecessary conflict and common pitfalls.
