What to Know About Splitting Debt in a Divorce

Are you getting a divorce from your spouse, but you two also have various liabilities and debt that need to be divided as well? Here are some things to know about how this part of the divorce process will go.

Community Property Laws May Apply

If you live in a state that has community property laws, this means that both spouses are responsible for debts that are incurred during the marriage, no matter who is responsible for creating the debt. While most debts have property associated with them, such as buying a car or home, there are debts that do not have any sort of property associated with them that make it difficult to split.

For example, if one person took on a lot of debt for student loans so that they can further their educations, those debts would be considered communal as long as they were taken on during the marriage. The same will apply to medical bills that are under one person's name.

Bankruptcy Can Be Used to Eliminate Some Debts

There are various debts that can and cannot be discharged during a bankruptcy proceeding. If you have debts that can be discharged, it's worth considering bankruptcy prior to getting a divorce. Those debts are going to be jointly held between both spouses, so eliminating them is going to help both people in the long run. While medical bills and credit card debt can be discharged, you can't do the same with things like back taxes and student loans. This may change your approach to if you want to use bankruptcy. 

Legal Separation Rules May Apply

There are some states that recognize a legal separation, which can impact the debts that are taken on during this time. If you live in a state that does not recognize legal separation, it means that new debts taken on after the separation will still be jointly owned by both spouses. If you live in a state that does recognize legal separation, it is possible to argue that new debts taken on after the separation are not community property. This can make a big difference if one spouse has decided to take on new debt as part of the separation, or has decided to go on a spending spree.

Infidelity May Change Who Owns a Debt

In situations where infidelity was a reason for the divorce, you may have a right to argue that some debts are not community property. For example, if a spouse spent money on a lavish gift for another person, it's possible to argue in court that you do not want to be responsible for that debt. To learn more about handling such issues, work closely with a divorce lawyer.