DEBTS

Several years ago, the main financial issue in a divorce was the division of retirement accounts and the marital residence.  Now, due to the unfortunate turn in economic circumstances in the United States, we find more and more the division of the marital estate to be most concerned with divvying up the debts.

Debts are not divided in the same manner as property, because there is no statute or legislative law directing the Court on how to divide debts of the marriage.  You must first make a strict accounting of all the debts both you and your spouse have, including consumer debt, mortgages, tax obligations and liens.  Afterward, you must decide how you believe the debts should be divided.  Keep in mind the prevailing interest rates and due dates on the obligations when you do; some debts with higher principal are actually better to be incurred by you if some of the smaller debts have exorbitant interest rates (read: credit cards).

The Courts utilize case law for guidance on dividing debts.  The Courts typically look at four different factors when deciding which party should take the marital debts.  The Courts will look to determine the purpose for the debt.  The Court will look to see if the debt produced a marital asset, and, if so, who will receive the marital asset.  The Court will determine which party benefited from the debt.  And, finally, the Court will consider which party has the greater ability to pay the debt.  It is this last factor that often causes wealthier parties, without strong representation, to shoulder large portions of the marital debt.