Debt from a divorce can have a big impact on life after divorce. It can affect your credit score, making it harder to borrow money in the future. It can also make it difficult to meet daily expenses, especially if you also have to pay things like alimony or child support.
Divorce isn’t just about ending a marriage but also about separating things that were shared. One of these things is debt. When two people say goodbye to each other, what happens to the debts they have together? It is an important question. Let’s look at four more questions to understand this better.
How is Debt Classified in a Divorce?
When a couple divorces, the debt they share is usually divided into marital debt and separate debt. Marital debt is all the money that was borrowed during the marriage.
- Marital Debt: It refers to the debts both spouses acquire during marriage. These debts are considered shared responsibilities, and married couples share many things. It includes loans and mortgages taken out during the marriage.
- Separate Debt: Separate debt is the debt that belongs to only one spouse. It includes debts incurred before debts one spouse accumulated individually without involving the other spouse. For example, if one spouse had a student loan before marriage, that debt is separate.
It could be for things like a house or a car. Separate debt, however, is any debt brought into the marriage by one person. Usually, each person is accountable for their separate debt.
How is Marital Debt Divided in a Divorce?
In a divorce, marital debt is usually split in one of two ways: equally or equitably.
- Equally: Each person is accountable for half of the debt. It is common in states that follow community property laws.
- Equitably: This means the debt is split in a fair but not necessarily equal way. Factors such as income and who benefited more from the debt can affect this. It is common in states that follow equitable distribution laws. Get help from divorce law experts Markham for fast procedure.
What Factors are Considered when Dividing Debt in a Divorce?
When it comes to dividing debt in a divorce, several factors are considered:
- Who took out the debt?
- What was the money used for?
- Did both parties benefit from the debt?
- What is each person’s ability to pay the debt?
- Are there any prenuptial or postnuptial agreements in place?
A court can decide who is accountable for the debt by considering these questions.
Understanding and Handling Debt in a Divorce
Navigating debt during a divorce can be a difficult task. It’s important to grasp how debts are divided to better prepare for this process. If your parents are going through a divorce, they may find it beneficial to seek guidance from a lawyer or financial advisor. These experts can provide personalized advice based on their unique circumstances. Remember, asking questions and seeking assistance is crucial during this time. By clearly understanding the debts involved, your parents can work towards a more secure financial future.