Debt in a divorce can be difficult to divide. During the marriage, significant marital debt may accrue. When a couple divorces, one or both spouses will be responsible for repayment of each debt.
Debt needs to be identified, valued, and divided. However, courts may treat different types of debts differently.
Mortgage Debt in a Divorce
Many divorcing couples have a family home. The home may have debt attached to it. Most typically, a home has a primary mortgage. In addition, homes may have a second or third mortgage. Spouses often use these additional mortgages for home improvements or as a home equity line of credit (HELOC).
These debts typically flow with the home. In other words, if one spouse keeps the house, he or she is usually, but not necessarily, assigned the associated debts. That spouse is responsible for repayment relative to the other spouse in the divorce.
However, the lending agency isn’t a party in the divorce. If the couple’s names are both on the mortgage, the lender still treats them both as responsible for repayment. Practically, a lending agency may still go after either spouse.
Because of this, some divorces involve refinancing. In this event, the original mortgage is paid off and replaced by a new one with only one of the ex’s name on it.
Ultimately, this marital debt is subtracted from the value of the home when determining “home equity”. This is the net value of the asset for the divorce.
Student Loans in a Divorce
The spouse who benefitted from the student loan is typically assigned that loan. The idea is that spouse is the only one who can receive the benefit of that debt and therefore should be responsible for the repayment of it.
Credit Card Debt in a Divorce
If the spouses accrued the debt while living together and it was used for marital expenses, this will be considered a marital debt.
Spouses assign credit card debt as part of balancing the property division. In other words, if one spouse receives more in marital assets, he or she may take a greater share of debt to offset this. This makes the marital property division more “fair and equitable”.
Car or Truck Loans
Like with homes, vehicle debt generally flows with the vehicle. When dividing vehicles, spouses subtract the remaining loan from the vehicle value. The spouse who keeps a vehicle is usually responsible for repayment of any loan(s) against it.
Typically, medical debts accrued during the marriage are considered marital debts.
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