Nobody wants to be stuck with all their ex’s debt. However, due to colloquialisms and other sorts of misinformation, many people fear that their spouse will take everything—except for the debt. Although anything is possible, the aforementioned is rarely the case: it would be highly unusual for one party to take all the assets and leave the other party to pay off the debt on the assets. In most cases, the debt is split between both parties, and whoever takes the asset generally takes the debt that is left on it. So even though you don’t (likely) have to worry about your ex taking the car while you take the payments on the car, you may still be wondering how marital debt gets divided.
How Is Marital Debt Normally Divided?
In Utah, we have equitable division, meaning that property is divided in a way that the court feels is equitable, and the presumption is that 50/50 (equal division) is equitable. This does not necessarily mean that assets and debt are split right down the middle. Rather, assets are divided in a way the judge feels is fair for both parties. When it comes to assets that have debt, such as a car, the debt generally goes with the party who takes the asset. So, if you get the car, you also get the debt that comes with the car. In a case where neither party can afford the payments on an asset, the asset will be sold and, if the party is upside down on the asset, that debt will be split equitably. If the asset is “underwater,” or has equity, that amount can be subject to equitable division. This happens with real property and motor vehicles mostly. While the court cannot change a contract or the rights of a creditor, it can offset a debt owed with additional assets. It can also order a party to pay a debt or refinance a debt subject to court sanctions for failure to do so.
What If There’s No Tangible Asset?
For the most part, credit card debt is split equitably. This can mean that you both take on half of the debt. It may mean that you take on all the debt in exchange for assets that offset the debt. Or, it may mean some other arrangement. If you can establish that debt was incurred for an improper purpose, or solely benefits the other party, it may be assigned entirely to them. If the debt was for some marital purpose, it’ll likely be subject to equitable division. Marital debt also includes student loans when the funds were used for a marital purpose. Typically tuition isn’t viewed as a marital purpose, but paying for rent, food, or other living expenses may be viewed as a marital purpose.
Date of Separation
Date of separation could potentially impact how debt is divided. Both parties are responsible for debt accumulated during the marriage. But, once you’re separated, you may not be responsible for the debt your spouse accumulates even though you’re still married. However, it’s still possible that you will be responsible for debt acquired past the date of separation. If your spouse has run up a significant amount of debt after separation but prior to divorce, it’s important to at least consult with an attorney in order to ensure the best possible outcome. The law holds that the date of division of the marital debts is at the time of trial unless there is some compelling reason for the court to select another date for division. The most common result in divorce settlements is for the parties to elect to divide marital debts at the time of separation. This means that both parties would be responsible for their own post-separation debts.
Generally people are not responsible for debt their spouse acquired prior to the marriage. However, there may be exceptions to this. If you are concerned about the debt your spouse has before the marriage, a pre- or postnuptial agreement can help protect you from being responsible for this debt. Separate accounts alone may not protect you from your spouse’s financial decisions. Keeping your finances separate does not make you less responsible for any debt your spouse acquires during the marriage. You may still be responsible for debt your spouse acquires during the marriage even if you didn’t know your spouse was acquiring that debt in the first place. If you’ve got concerns about how premarital debt will impact your divorce, your best option is to consult with an attorney.
When You’re Filing for Divorce
If you’re going through a divorce, having an attorney to advocate for your best interests is a great way to ensure you’re getting the best outcome possible. Though a lot of people feel as though they’ve lost a lot during their divorce, having an attorney on your side can reduce your losses. If you’re ready to file for divorce, contact CoilLaw today.