So the person you thought was your soul mate turned out to be someone you wish you’d never met. You’ve started the divorce proceedings,
but don’t know what to do about all the debt you and your soon to-be-ex-spouse have accumulated. Here are some things you should consider.
The Pre/Post Nuptial Agreement
The first thing to look at when deciding who has responsibility for the marital debts during a divorce, is whether there is a pre/post nuptial agreement (commonly called a pre-nup). While many people think that if their fiancée or spouse asks them to sign a pre/post-nup they aren’t trusted, a growing number of couples are making them in order to protect their individual interests.
If there is a pre or post nup, then unless the agreement is invalid, the agreement controls what happens to the couple’s assets and liabilities during a divorce. If there isn’t an agreement or the agreement is invalid, then the laws of the state concerning property division control.
When dealing with debt in any state, there are times when one ex-spouse does not (either because they’re angry or simply don’t have the money) pay some or all of the debt the divorce decree says they are responsible for. In this case, the other ex-spouse has two choices. The non-defaulting spouse can go to court and have the debtor spouse explain why they’re not paying the debt (which in some circumstances can lead to fines and jail time for the defaulter) or they can pay on the debt and go to court to get reimbursed. It all depends on how messy the divorce was.
In the US states can be divided into two different categories depending on how they deal with the distribution of property between married couples.
A small minority of states, mostly in the portions of the country the US acquired from France or Spain, are community property states. The majority of states in the US are “common law” or “equitable distribution” states.
Community property states
In most community property states, debt acquired during the marriage is considered as belonging to the couple, just like any assets acquired during the marriage. Community property states split marital property and debt right down the middle. Each person gets half the assets (or their fair market value) and each spouse becomes responsible for half of the marital debt. In order to determine which ex-spouse is responsible for which debt, the courts usually look to see who initially agreed to be obligated for the debt and whether the debt was for the family as a whole or just one spouse.
Common law states
Common law states split debt in one of two ways. They can split marital debts between the two divorcees, just like a community property state or they can divide them according to what seems fair to the judge. Usually, when dividing debts, the ex-spouse who gets most of the assets will get most of the debts as well. The judge can also look at each debt, see what it was for and who agreed to be liable for it and divide it that way.
Going through a divorce is stressful for you and your family. Going through a divorce and dealing with debt can be even worse. Here are some tips you can follow to make your life easier when dealing with both:
•Find yourself a divorce lawyer. An experienced divorce lawyer will know how to get you an equitable settlement and save you the hassle and emotional stress of fighting with your ex.
•Don’t hide any assets or debts from your ex. It is always better to be honest and open with your lawyer and with your ex than to lie and risk getting caught.
One thing that divorcees always have problems with is what to do if your ex doesn’t pay a debt the divorce decree says he or she has to pay and the creditor comes after you. If this happens, you have two options.
The first option is to send the creditor a copy of the divorce decree that shows them that your ex is responsible for the debt and you aren’t. This may or may not work, depending on the creditor. You may end up being sued by the creditor, again, depending on the creditor.
Your second option is to pay the debt, making sure that you get proof that you paid it. Then go to court and get an order from the divorce judge saying that your ex has to pay you what you paid to the creditor. In this case you are essentially stepping into the creditor’s shoes.
No matter what you do, know your legal rights and debt won’t bother you either during or after divorce!