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Divorce: How is Debt Divvied Up?

The general rule of thumb for dividing up assets and debts in a divorce goes like this: any assets or debts accumulated before marriage is off the table, and any assets or debts accumulated during the marriage is fair game.

Of course, the “50/50” guideline is a very general rule of thumb and every case is different. Let’s take a look at how debt may be divided in actuality.

What Kind of Debt?  

An important question that the judge will consider is, “What kind of debt are we talking about?”

If Husband came into the marriage with $20,000 worth of student loans, he’ll keep that debt in the divorce since it was incurred before the marriage. On the other hand, if he first got married and then incurred the debt, it’s technically marital debt and Wife may end up having to carry some of it through the divorce.

If that feels unfair, consider what I always tell my clients to reassure them: the Court has discretion when it comes to how to allocate the debt, and the Court wants to divide it fairly and equitably.

For instance, if you have $10,000 on a credit card that was spent to purchase furniture for the house or take the family to Disneyland, it will be divided equitably. That was debt incurred to improve the life of the whole family, not just one party.

However, if Husband ran up $10,000 on a credit card to take his mistress on weekend trips and purchase gifts and dinners for her, the Court is more likely to assign that debt to him.

Assets and Debt

There are likely to be considerations beyond debt, as well. For instance, the Court might say, “Husband, you actually have to pay the entire debt, but we’ll give you more assets to offset the fact that you’re paying wife’s half.”

In this example, let’s say that proceeds from the sale of the house are $200,000. The judge might say, “Husband, you take on all of the credit card debt, but instead of splitting the $200k equally, I’ll give you half the value of the house plus $5,000 to make it fair.”

This way, Husband has assets to make up for the fact that he will be responsible for the debt.

Debt isn’t always Cut and Dry

Generally speaking, when it comes to dividing the debt, the judge will weigh what the debt was incurred for more heavily than who incurred the debt.

However, most cases are not this simple and the nature of the debt can land in nebulous territory. This is exactly why it’s important to do your research, hire a local attorney with a good track record, and make sure you are thorough.

If you’re getting ready to go through a divorce case, let’s talk. Call us at 303-449-1873 to set up a free consultation.