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Divorcing spouses have to divide debt too

On Behalf of | Mar 13, 2020 | Property Division

In a divorce, dividing marital property is often one of the most challenging issues spouses face. They must negotiate who gets the house as well as how to divide the assets in their shared checking account.

However, property division not only requires spouses to split up the assets they obtained during the marriage. It also requires them to divide their debts.

How do spouses divide debt?

Divorcing spouses must determine who is responsible for paying specific bills and debts even after they end their marriage.

Since Michigan is an equitable distribution state, spouses generally must divide debts fairly between them. This often requires them to evaluate:

  • Who incurred the majority of the debt;
  • Whose name the debt is under;
  • Who was responsible for paying the debt during the marriage; and
  • Each spouse’s ability to pay the debt, if they share responsibility equally.

Valuing all shared debts and dividing liability can be a complex process. It is critical for spouses to consider debt division before they finalize their divorce, so they can avoid financial consequences. After all, the agreement with the loan servicer will trump the divorce agreement.

Some types of debt will be more difficult to divide than others

Spouses can use the factors above to determine how they will divide many types of debt, including shared credit card debt. However, some debts may require different considerations and processes. For example:

  • How spouses divide the liability for their mortgage often depends on who stays in the house. It might also require spouses to refinance the mortgage into only one spouse’s name; and
  • Dividing auto loans can also be challenging in a divorce since they are connected with a secured asset which spouses must divide in divorce proceedings.

Dividing debts can be complex, so spouses must approach this process carefully to protect their financial future after their divorce.

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