How Does Divorce Affect Debt?

how does divorce affect debt

Are you still responsible for debts after a divorce?

A creditor’s right to collect a debt is not affected by your Final Decree of Divorce. You still have the responsibility of paying all debts.

So if the judge orders your spouse to pay a debt that is in both your names (such as a car loan or mortgage) but your spouse doesn’t pay it, the creditor can still seek payment from you. Ask the lawyers at Marx, Altman & Johnson how to protect yourself in this situation.

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What property and debt is divided in a divorce?

Community property and debt is divided in a divorce. Separate property and debt is not divided.

At the end of your divorce case, a judge will divide your property and debt by signing a Final Decree of Divorce. The Final Decree of Divorce will:

  • list the community property each spouse will keep or in some circumstances order community property (such as a house) sold and say how the proceeds should be split,
  • list the separate property (if any) of each spouse,
  • list the debts each spouse is ordered to pay, and
  • order that the community property retirement benefits of each spouse are either:
    • awarded (given) 100% to the spouse who earned the benefits or
    • divided between the spouses.

Note: The Final Decree of Divorce divides your property and debt; however you may need to take additional steps after the divorce to transfer vehicle titles or real estate deeds.

Community Property and Debt vs. Separate Property and Debt

What is community property and debt?

Community property includes all property you and your spouse have at the time of divorce except property that a spouse can prove (or the spouses agree) is the separate property of one spouse.

Your community property may include real estate (a house or land), a business, cars, money, retirement accounts, furniture and other things earned or purchased by either spouse during your marriage. It doesn’t matter which spouse’s earnings were used to purchase the property or which spouse’s name is on the title.

Community debt is debt you or your spouse got during the marriage.

The law says that community property and debt should be divided when you get divorced in way that is “just and right.” This does not necessarily mean 50/50.

Note: There are exceptions to these general rules. If you have questions, it’s important to talk with a lawyer.

What is separate property and debt?

Separate property includes:

  • property owned or claimed by one spouse before the marriage,
  • property received as a gift or inheritance to one spouse during the marriage,
  • money received by one spouse for personal injuries that occurred during the marriage (not including money received for lost wages or medical expenses), and
  • stock dividends and capital gains on the separate property investments of one spouse.

Unless both spouses agree, a spouse must prove that something is separate property by “clear and convincing evidence.” If a spouse cannot prove something is separate property, it is considered to be community property.

Separate debt is debt one spouse got before the marriage.

The law says that separate property cannot be divided. Once something is proved to be separate property the judge must confirm it as the separate property of that spouse.

Note: There are exceptions to these general rules. If you have questions, it’s important to talk with a lawyer.

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