Debt and Your Divorce

Debt is commonly cited as one of the top reasons why couples get divorced, and it certainly can be a major source of dissension during separation. To many people’s dismay, when your marriage ends your responsibility for your spouse’s debt may not end.

credit cards

Community Property States vs. the Equitable Distribution States

Where you live affects the chance of your having to take on the burden of your spouse’s debt during a divorce. Nine states are considered “The Community Property States” where both spouses are responsible for each other’s debt, regardless of whose name is attributed to the debt. Everything in the marriage, including savings, income, and debt, is split 50-50.

The other 41 states, including Georgia, are classified as “The Equitable Distribution States,” meaning the Court will decide who will be responsible for the debt-based upon what the Court believes is fair under all of the circumstances. The Court may decide to have the husband pay; the wife pay; or the parties share the debt. A myriad of factors is considered when dividing the debt, including the length of the marriage, the age of each spouse, and the future earning capacity of each party.

I Have Shared Debt – Now What?

If you share the debt, the best thing to do, not surprisingly, is to eliminate the debt as soon as possible. Credit card companies and other agencies to which you may owe debt aren’t obliged to follow divorce agreements. If one person isn’t paying their portion of the debt, even if a judge rules they should pay, a credit card company or other third parties may go after you and your ex-spouse. Do you and your family a favor by completely separating yourself from the other’s finances.

Will This Affect My Credit Score?

Unfortunately, yes. Another reason to separate yourself from another person’s debt is that any missed payments of theirs will negatively affect your credit score – where it will remain until the end of the natural 7-10 year expiration date. In addition to paying off shared debt as soon as you can, close all shared accounts such as credit cards and mortgage payments immediately to distance yourself from any financial mistakes your ex-spouse may make.

Debt and divorce are two extremely complex topics where the surface can nary be scratched through a blog post. The takeaway from this is that debt in divorce can get very messy and is something you should talk to an attorney about as soon as possible. The sooner you do, the sooner you’ll have a clearer picture of what your financial situation will be after you separate from your spouse.

Whether debt will play a factor or not in your divorce, you should always talk to an attorney before talking to your spouse about a potential divorce. If you have questions regarding divorce or the division of assets, not just those relating to divorce, please give me a call. ­