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Dealing with debt issues in divorce, P.1

Divorce can bring a number of different uncertainties into a person’s life, but one of the biggest uncertainties for many couples how they will be sitting financially once the divorce is over. The financial aspect of divorce involves dealing not only with a couple’s assets, but also its debts, though many couples don’t think about dividing their assets until the issue comes up in divorce.

Dividing debts in divorce is done according to the same principles used in property division. Here in Michigan, the rule for property and debt division is equitable distribution, which entails a division that is fair rather than equal, though it may certainly be equal in some cases. Judges take into account a variety of factors when determining what constitutes an equitable division. 

Different couples obviously have different circumstances when it comes to debts. Many couples have mortgage debt, and this has to be dealt with, as does student loan debt, and credit card debt. The latter can be particularly frustrating, not only because couples often share credit cards, but because banks don’t care what a couple decides in terms of who owes credit card debt under a divorce agreement. The only thing they care about is who they can legally sue for the money.

Generally speaking, couples will be assigned credit card debt on the basis of whose name appears on the account. If it is a joint account, the debt will have to be split in some way. Again, though, the important thing to remember is that the party whose name appears on the account is, from the debtor’s perspective, the one who can be pursued for payment.

Couples need to be aware that they do have the ability to sue a former spouse under a divorce agreement when he or she doesn’t fulfill his or her obligations. So, if Spouse and Spouse B agree that Spouse B will take on credit card debt after the divorce, Spouse A is still responsible to the bank for that debt. Spouse A can recoup the money, though, by suing Spouse B under the divorce agreement.

In our next post, we’ll look a couple other types of debt and some of the issues that may come up in those cases. 

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Dealing with debt issues in divorce, P.1 | Peter A D'Angelo, Attorney at Law, PLC