Over the course of a marriage, you and your spouse will undoubtedly accumulate certain debts, and when contemplating divorce, many wonder how debts will be resolved. First, the court will determine which debts are marital and which are separate.
Separate debt is debt that was incurred before the marriage or after when the marital partnership terminates as a matter of law, which may not be the day when you start to live separately. Separate debt is usually the responsibility of the spouse who incurred it.
Marital debt includes almost any debt incurred during the marriage, regardless of which spouse incurred it or whose name is on the account. This can include credit card debt, car loans, mortgages and other types of debt. Like marital property, marital debt is divided as part of the equitable distribution process during a divorce. Equitable distribution means that the court will divide marital property and debt in a way that is fair, but not necessarily equal.
Marital debt will be divided between the spouses based on a variety of factors, such as each spouse's income and earning potential, the length of the marriage, and the standard of living during the marriage. The court may also consider factors such as each spouse's contribution to the accumulation of debt and their financial needs and obligations.
Ultimately, the court can order each spouse to pay a portion of the marital debt, either through a lump sum payment or over time. It's important to note that a divorce decree does not affect the contract between the debtor and creditor, so if one spouse is ordered to pay a debt and fails to do so, the other spouse may still be held responsible by the creditor. The same applies to tax debts, because the Internal Revenue Service and the state taxation authorities can collect tax debts from both parties who file joint tax returns, regardless of how you may agree to divide tax liabilities in a divorce agreement.
The way you handle debt in a divorce can have an impact on your finances in the future. If you have questions on how to handle marital debts, contact the family law attorneys at Cohn Lifland Pearlman Herrmann & Knopf to discuss alternate solutions for dealing with debt during the divorce process.