When you are getting a divorce, it is just as important to fight for your assets as it is to try to get rid of your debt. No matter how many assets you have or how high your net worth is, you still may have debt such as a low interest rate mortgage or student loans. How does this debt affect the divorce proceedings, and what should you be aware of?
How Courts Split Up Debt
Courts will typically split up who is responsible for which debt in the divorce decree. A spouse who receives a large number of assets may also receive a large amount of the debt. How debt is split will also depend on whether the state is a separate property or community property state. In a separate property state, you are typically only liable for debt that it is in your name or that you co-signed for. In a community property state, either spouse may be liable for debt incurred during the marriage – even if only one spouse was aware of it and only one spouse signed the loan agreement. The court may also take into account whether or not the debt that one spouse took on was beneficial to both parties. In neither community nor separate property states will a spouse be liable for debt that the other spouse incurred before the marriage or after the divorce. California is a community property state, as are Arizona, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. In Alaska, you and your spouse can decide whether your property will be community or separate.
What Can You Do to Protect Yourself?
Via the divorce decree, a judge may assign debt to one spouse to pay off. However, this divorce decree only covers the divorcing couple; it has no power over creditors. Even if your ex is supposed to pay off a car loan or a mortgage following a divorce, the creditor may still be able to come after you if your ex does not make the payments. In order to try to prevent this, you can get an indemnity clause included in your divorce decree so that you can sue your ex for any loan payments that you end up having to make that he or she was actually responsible for according to the divorce decree. You should also insist on refinancing any debt that your ex will be responsible for so that it is only in his or her name. This requirement can also be added as a clause in your divorce decree.
No matter how complicated your divorce, we can help. For help with your case or in any other aspect of family law, you can turn to the Law Office of Renkin & Associates for the help that you deserve. We are prepared to answer your questions and fight for your assets.