If you are like millions of other Americans, you or your spouse currently has debt, be it from student loans, medical bills, credit cards or a mortgage. If either of you has debt, you will need to address it if you divorce.
Just as you divide property when you end a marriage, you also divide liabilities. However, distributing debt can be particularly complicated for the following reasons:
- You are not sure to whom it belongs. Debt can be either separate or marital, just like assets. If you brought existing debt into the marriage, it can stay with you as a separate liability. Loans taken out by one or both of you while married are marital debts. That said, parties can disagree when it comes to categorizing any asset or liability.
- You assume “equitable” means “equal.” In a Georgia divorce, the courts divide marital property and debts equitably. While they could divide everything in half, there is no guarantee that your debt will be divided equally between parties. Courts consider many factors in determining how to distribute debt fairly. Factors include who took on the debt, who benefited from the loan and who has the resources to repay the loan. Based on these and other details, the courts could assign a much larger share of marital debt to one party.
- You can’t agree on how to divide your debt yourselves. It can be unsettling to think that the equitable division of your assets and debts are in the hands of a judge who knows very little about you and your marital situation. However, you do not have to leave decisions regarding debt distribution up to the courts. Divorcing spouses can come to agreements on their own outside of court, which can alleviate the stress and cost of litigation.
- You oversimplify your financial picture. Too many people oversimplify financial details during a divorce. They underestimate debts; they assume divorce releases them from loan agreements; they don’t realize that their soon-to-be ex-spouse racked up more debt than they knew about. To avoid unpleasant (and expensive) surprises, it is often wise to consult your attorney as well as financial professionals regarding property division.
Debt can be a complicated element in any divorce settlement. However, having a better understanding of the laws and avoiding misconceptions can make it easier to make decisions that support your best interests.