Show Me the Money! Tips for Splitting your Debt in Divorce

Introduction to Debts and Divorce

man signs his divorce documentsIn a divorce, when speaking of “division” most people think of the assets and property the couple has acquired during the marriage. Of course, a court presiding over a divorce case will divide the property of the couple according to the laws of the particular state. In community-property states like Arizona, property that either of the spouses acquired while married will be divided in an even or near-even manner. Other states will simply divide the marital property in a fair and equitable manner. Courts are also called upon to use these same principles to divide the debts of the spouses as well.

Tips for Dividing Debts in a Divorce

Obviously, the property and assets that a party receives during the division process of a divorce proceeding can have a significant impact on that party’s financial future. However, what steps can a party to a divorce action take before the petition is filed and while the case is pending to ensure that he or she is treated fairly during the division of debts?

  • Consider a prenuptial agreement. If you are concerned about debts in your marriage, you can make a “preemptive strike” and agree with your spouse how debts will be apportioned through a valid prenuptial agreement. You and your spouse could agree before marriage (for example) that consumer debts will be apportioned to the party that incurred them – protecting you from a spouse who runs up a credit card bill while shopping – while any home or medical bills will be split evenly. So long as the requirements for a valid prenuptial agreement are satisfied, the court will generally honor these provisions and divide the debts accordingly.
  • Keep credit lines separated. It can become difficult to determine what spouse incurred what debt if the spouses are joint account holders and are therefore both responsible for the debt. To avoid this problem, consider applying for your own credit and not adding your spouse as an authorized user. Encourage your spouse to apply for his or her credit line. Once separate credit lines are established, resist the urge to make purchases for your spouse that you are not prepared to pay for (medical bills and other emergent expenses notwithstanding). If your spouse wants to splurge and spend $2,000 at the clothing store, it will be easier to apportion that debt solely to your spouse when he or she made the purchase using his or her own credit card.

dividing debts in divorceMake certain that for any debts you are awarded that you also retain the associated asset. Although it does not happen often, sometimes a court will order a spouse to pay a particular debt, but the asset associated with that debt will be given to the other spouse. For example, you may be ordered to pay the debt for a car that the court awards to your spouse. To prevent this, take advantage of any opportunity afforded to you by the court to submit a proposed property division order.

In your proposed order, identify for the court the assets you wish for the court to award you during property division and identify the associated debts. Spell out for the court that you are willing to assume the responsibility for paying any debt associated with the assets you are asking to be awarded (unless, of course, you have a valid argument why the other spouse should be forced to pay for such an asset). If the judge makes a mistake during the division of assets and debts, bring it to the court’s attention right away so that the court has an opportunity to correct itself.

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