Legal Blog

What happens to Debt in Divorce: Understanding Financial Responsibilities

Two keys with split house matching keychains on a wooden table. Splitting assets in a divorce.

Divorce is a challenging time, often fraught with emotional and logistical complexities. Amidst the emotional upheaval, one aspect that requires careful consideration is the division of debts. Financial entanglements can add a layer of complexity to an already difficult situation. Understanding how debts are handled during a divorce is crucial for both parties to ensure a fair and equitable resolution.

When a couple decides to end their marriage, their assets and debts must be divided, ideally through an amicable agreement or by court order if necessary. Debts accumulated during the marriage, whether they are mortgages, car loans, credit card debts, or other financial obligations, are subject to division, much like marital assets.

The legal principle governing debt division varies depending on the jurisdiction. In community property states, such as California, debts incurred during the marriage are generally considered community property and are divided equally between spouses, regardless of who incurred the debt. In equitable distribution states, which include the majority of states in the US, debts are divided fairly but not necessarily equally, taking into account factors such as each spouse’s income, earning potential, and financial contributions to the marriage. 

Types of Debt:

  1. Marital Debt: Debts incurred during the marriage are typically considered marital debt, regardless of which spouse’s name is on the account. This includes mortgages, car loans, credit card debt, personal loans, and any other liabilities accrued during the marriage.
  2. Separate Debt: Debts acquired before the marriage or after the separation are generally considered separate debt and may remain the responsibility of the spouse who incurred them. However, if separate debt was used for marital purposes, such as household expenses or joint purchases, it may be subject to division.
  3. Joint Debt: Loans or credit accounts held jointly by both spouses are equally the responsibility of both parties. Even if only one spouse benefited from the debt, both are still liable for repayment. Joint debts can include joint credit cards, joint bank accounts, or co-signed loans.

During divorce proceedings, the division of debt can be negotiated between the spouses or decided by a judge. Ideally, divorcing couples should aim to reach a mutually agreeable arrangement through mediation or collaborative divorce to maintain some level of control over the outcome. However, if an agreement cannot be reached, the court will intervene and make decisions based on state laws and the specific circumstances of the case.

Factors Considered in Debt Division:

  1. Income Disparity: If one spouse earns significantly more than the other, the court may allocate a larger share of the debt to the higher-earning spouse to ensure both parties can maintain a similar standard of living post-divorce.
  2. Financial Contributions: The court may consider each spouse’s financial contributions to the marriage when dividing debt. This includes income earned, assets brought into the marriage, and non-monetary contributions such as homemaking or childcare.
  3. Marital Misconduct: In some cases, marital misconduct such as financial infidelity or excessive spending may influence the division of debt. For example, if one spouse recklessly incurred debt without the other’s knowledge, the court may assign a greater share of the debt to that spouse.
  4. Future Financial Needs: The court may take into account each spouse’s future financial needs, especially if one spouse requires financial support due to health issues or caregiving responsibilities.

Once the division of debt is finalized, each spouse is responsible for their allocated share of the debt. It’s essential to take proactive steps to manage and address the debt to avoid negative consequences such as damaged credit scores or legal actions by creditors. Some strategies for managing debt post-divorce include:

  1. Refinancing or Transferring Debt: If feasible, spouses may consider refinancing joint loans or transferring debt to individual accounts to remove the other spouse’s liability.
  2. Negotiating with Creditors: It may be possible to negotiate with creditors to modify payment terms or settle debts for a reduced amount, especially if financial circumstances have changed due to divorce.
  3. Creating a Repayment Plan: Developing a structured repayment plan can help manage debt effectively. Prioritize high-interest debts and consider consolidating multiple debts into a single, more manageable payment.
  4. Seeking Legal Advice: Consulting with a financial advisor or attorney specializing in divorce can provide valuable guidance on navigating debt division and developing a strategy for managing debt post-divorce. 

In conclusion, debt division is a critical aspect of the divorce process that requires careful consideration and negotiation. Understanding the types of debt, factors influencing division, and options for managing debt post-divorce can help spouses navigate this aspect of their separation more effectively. By working together or with the assistance of legal and financial professionals, divorcing couples can achieve a fair and equitable resolution to their financial obligations, allowing them to move forward with their lives independently.


Cheryl Hepfer | 240.507.1752

Cheryl Hepfer is a highly-regarded attorney who has practiced family law for more than 40 years. She has been rated by her peers and is listed in Best Lawyers in America and as a top lawyer in the Washingtonian, Bethesda Magazine, and Super Lawyers. She is past president of both the American Academy of Matrimonial Lawyers and the International Academy of Family Lawyers.