What Happens To Debt After Divorce? (What You Should Know)

If you accumulated a lot of debt during your marriage, then it’s important to understand what happens when you get divorced.

When facing a separation or the dissolution of a marriage, a common initial concern revolves around responsibility for one’s spouse’s debts post-divorce. 

This apprehension arises due to the intertwining of finances during marriage, encompassing shared credit cards, joint loans, or even jointly acquired properties. 

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As a result, the fate of this debt in the event of a divorce becomes a complex matter.

Determining who bears responsibility ultimately hinges on several factors, notably the specific laws governing divorce in your state of residence, any prenuptial agreements that may be in place, and whose name is legally tied to the loan or debt agreements.

KEY TAKEAWAYS:

• Typically, the person whose name is on a debt is the responsible party, but many other considerations affect it.
• The type of debt is one of the largest considerations when determining who’s responsible for debt after divorce.
• While the judge has the ultimate decision regarding what happens to debt during divorce proceedings, there are certain steps you can take to protect yourself.

Who Must Take Responsibility For The Debt After Divorce?

Divorce requires many decisions, and your debts are one of the larger ones. Who is responsible for each debt you have after divorce? 

This should be something you understand going into the process so you can ensure everything is split fairly.

Typically, the person whose name is on the debt is responsible, but many other considerations affect it. If you and your spouse have a lot of debt, it’s important to know how it will be handled, although there isn’t a one-size-fits-all approach since many factors affect it.

Factors Affecting Who Is Responsible

When getting divorced, one of the largest factors affecting who’s responsible for the debt is whether it’s marital or separate debt. Here’s how they differ.

• Marital debt: You accumulated this debt together during marriage, and both partners benefited from it, such as a mortgage to purchase the house you both live in.
• Separate debt: This is debt you brought to the marriage that is only in your name. For example, if you have student loans from college, they are separate debts in your name only.

Typically, separate debt isn’t up for debate. The person who incurred the debt remains responsible. Marital debt, however, may be split between both parties. It depends on your state laws.

If you live in one of the community property states, both parties may be equally responsible for the debt. There are nine community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, and Washington.

If you live in a common law state (the remaining states), it’s more likely that the person whose name is on the debt is responsible, but it ultimately depends on the type of debt and the judge’s ruling if the case goes to court.

Types Of Debt And Who’s Responsible For Them

The type of debt is one of the largest considerations when determining who’s responsible for debt after divorce.

Mortgage

A mortgage is the most common type of debt in a divorce. Both names are likely on the mortgage if you bought your marital house with a mortgage. 

This means both parties are responsible for it, but the judge may award the house to one person, requiring that person to refinance the mortgage into their name only.

It’s important to understand that even if a house transfers ownership (both partners to one), that doesn’t take responsibility for the mortgage payment away if both parties are named on the mortgage.

In an amicable divorce, you might have a different agreement, such as one party making the mortgage payments. 

However, have the agreement in writing and know that you are still held responsible for the debt if your ex-spouse doesn’t keep up their end of the bargain.

Credit Card Debt

Credit card debt is another important and common type of debt in divorce. 

If you live in a community property state, both parties are equally responsible for the debt, even if both names aren’t on the account. In common law states, the person whose name is on the account is typically responsible.

Keep in mind that no matter what the court decides, if both names are on the credit card agreement, the credit card company can still come after the non-responsible person if the responsible party doesn’t pay as agreed.

It’s also important to remove authorized users from the account if you have a credit card in your name only. If your ex-spouse’s name remains on the account, he/she could technically still use it.

Auto Loans

Like a house, auto loans are secured by collateral, which, in this case, is a car. Typically, whoever the judge awards the car to becomes responsible for the debt. 

But again, like most debts, if both names are on the loan agreement, the responsible party must refinance the loan to be in only their name. 

If you cannot agree on who is responsible for the payments, or neither party wants the responsibility, the judge can order the car to be sold, and then they can split the proceeds. 

This is often the safest option, so the person who doesn’t get the car isn’t still responsible for the debt.

Student Loans

Student loan debt is the exception to the rule. 

Since student loans are for a single person, they are rarely a joint debt. The only time this wouldn’t be the case is if a spouse co-signed the debt, which would make both parties responsible for the debt.

Ways To Handle Debt During Separation

The waters can get a little murky when dealing with debt during separation. To best protect yourself, try the following:

• Remove authorized users – If possible, remove your soon-to-be ex-spouse from your credit cards as an authorized user. This prevents any spending while you are separated. 
• Refinance other debts – If you are a co-signer on other debts that technically are your ex-spouse’s, see if he/she will refinance you off the debt if possible.
• Pay down as much debt as possible – While you are still married, try paying off as much of the debt as possible to reduce the amount of debt that you must separate during the divorce.

Final Thoughts On What Happens To Debt After Divorce

Knowing what happens to debt after a divorce can help you be educated while going through the process. 

While the judge has the ultimate decision regarding what happens to the debt, there are certain steps you should take to protect yourself.

The more prepared you are going into the divorce, the smoother the process can go when splitting the debts. 

The key is to protect your credit and any debt you remain liable for, ensure it gets paid on time, or get the help you need for debt relief if you cannot afford it, but your name remains on the debt.

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As America’s trusted source for debt relief solutions, we aim to empower you with financial knowledge that can lead to informed decisions, whether it’s about savings, investments, or managing debt.

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By taking proactive steps today, you can put an end to your financial stress and work towards a brighter financial future. 

Remember, there is always hope for debt relief, and our team of experienced professionals are ready to guide you on your journey to regaining control of your finances.

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