Dividing Debt in Divorce

While divorce often brings enough emotional turmoil to your life, it is further complicated by financial challenges. During marriage, most couples end up taking on joint mortgages, joint credit card debt, and joint car loans. During divorce , that debt has to be divided.

Depending on the jurisdiction you are in, there are typically two ways that divorce courts divide up marital debt :

  • In community property states, the courts consider debt incurred during the marriage as the debt of both spouses, regardless of whether both spouses' names were on the debt.
  • In other states, such as Missouri, the courts divide martial debt equitably, so spouses are generally only responsible for the debt they incurred. If the debt was incurred on a joint credit card or loan, then both spouses would split that debt in divorce. If just one spouse took on debt, only that spouse would be responsible for it in divorce.

Protecting Yourself Financially While Going Through Divorce

When you are in the process of getting a divorce, there are several steps that you can take to protect yourself if your soon-to-be-ex decides to go on a spending spree with a joint account before the divorce is final:

  • Cancel joint credit cards. As soon as you know that your marriage is over, close joint accounts so that any balances cannot be further run up.
  • Keep detailed records. For any accounts that are not closed when you decide to separate, keep track of what charges you incurred and what charges your spouse incurred. It is also a good idea to run a credit report so you know exactly what accounts are open under your name. You may have to prove in court later who racked up what debt.
  • File joint-debt documentation with the court early. The earlier in the process you get the debt "on the record" the easier it will be for you to later prove who owes what.
  • Borrow money to pay off joint debt. Agree to take out individual loans for your portions of the debt, so that the joint debt is eliminated and your portion is in your name only. There are great risks of having joint debt remain after the divorce is final. For example, if your ex doesn't make his or her portion of the payments, or even files for bankruptcy, then the creditor can come after you for the entire amount.
  • Build up your own credit. To start building up your individual credit, it is a good idea to take out a new credit card in your name only.

Divorce can be messy and complicated, and it can be difficult to think clearly when your life is turning upside down. But keeping a level head when it comes to financial matters can make it much easier for you to move on with your life once the divorce is finalized.