The financial fallout in most divorces cannot be overstated. Rare is the situation in which a divorced individual does not have to make considerable adjustments to his/her standard of living to compensate for the loss of income and the imposition of support obligations. The division of marital property is supposed to offset these financial losses to some extent so a party is not left without resources. When it comes to property division, people tend to focus on the distribution of assets, but in addition, mutual liabilities or debts must also be shared. Assuming individual responsibility for a debt that was once the responsibility of two people can be a hard burden to bear after divorce, but like assets, the overall liabilities a couple may have are generally divided equally so one ex-spouse is not left paying for a disproportionate amount of debt. Understanding how courts divide property generally, and the effect, if any, a divorce order has on the right of a creditor to pursue a debt transferred to an ex-spouse is important to financial planning post divorce, and will be explored below.

Property Division Generally

Generally, all the property a couple owns is lumped into one pot that includes both assets and debts. Marital property is considered to encompass all property:

• Owned by either spouse prior to marriage;
• Acquired by either spouse after marriage and before the parties separated; or
• Acquired through the joint efforts of both spouses.

When courts assess the division of property, the spouse listed on a debt does not automatically remain responsible for the entire amount. All financial decisions during marriage are considered joint, regardless of who is listed as the owner or party assuming a debt. Thus, a court’s consideration of property division starts from the position that the division should be equal. However, the overall concern is that the division be just and reasonable, and either party may present evidence as to why an equal division is not appropriate. Evidence to rebut an equal division should address the following factors:

• The contribution of each spouse to the acquisition of property;
• The extent to which property was acquired before marriage or through an inheritance or gift;
• The financial resources of each party at the time of the property division, including the right of one party to remain in the marital home;
• The conduct of each party related to the disposition or waste of property; and
• The earnings or earning ability of each party.

Regardless of the percentage each spouse receives, courts generally do not address pieces of property individually, and instead will simply allocate the percentage each party can claim. A list is then created, listing all assets and debts with their respective values and outstanding balances, so that each party receives the appropriate net amount. How the ratio of debt to asset division will appear in the abstract depends on the types of property involved, and will vary by case.

Creditors’ Rights to Pursue a Debt

Unless a spouse is listed on a debt, a creditor generally cannot go after him or her due to nonpayment by the other spouse. This is true both before and after a divorce. However, if the debt was jointly held, and the ex-spouse was supposed to pay under the terms of the divorce order but he or she did not, the other party may be forced to pay it. This party can pursue restitution in court, but creditors generally do not care about the terms of a divorce if both spouses are legally responsible for the obligation.

Get Legal Advice

Divorce is a stressful time, and wondering how much money will be gained or lost once everything is settled is nerve-racking. Talk to a divorce attorney about your concerns, as an attorney will know, based upon your circumstances, the most likely outcome of the proceedings. Christopher L. Arrington is a Danville-based divorce and family law attorney that can help at all stages of the legal process, including requests for post-judgment modifications. Contact the office today to schedule an appointment.