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What happens to debt during a divorce?

Some people refer to divorce as "splitting up." This may be an accurate way to describe the process that often includes a tremendous amount of time and effort directed at splitting things between spouses. You will split your property, your time with your children and even your debts.

Perhaps you think it would be easy to divide the debts. After all, it may be pretty obvious which of you is responsible for some of the debts. Unfortunately, it's not always that easy. Since Kentucky is an equitable distribution state, your debts may not be divided according to who incurred them. The court may not even divide your debts equally between you and your spouse. However, the hope is that the division of debts – as with assets – will be fair.

Equitable division of debts and assets

From the day you and your spouse married, everything you accumulated became marital property in the eyes of the law. Your purchases, your income and the interest your investments earned may all be community property that you must divide fairly in your divorce. A fair division of assets takes into consideration several factors, including:

  • How long you were married
  • The income of each spouse
  • The future earning power of each spouse
  • The lifestyle to which you were accustomed during your marriage

In the same way, the court will divide your debt based on similar factors, including the value of the assets you acquire in property division. Regardless of whether you or your spouse acquired the debt, the court will assign responsibility individually to each spouse. You may end up responsible to pay debts your spouse ran up on a joint credit card without your knowledge.

Your legal liability

Even though your divorce orders divide the debt between you and your spouse, you are still legally responsible for any accounts that include your name. Therefore, if the court gives your spouse responsibility to pay the mortgage and your name is also on the loan, the bank will still hold you to the original agreement. If your spouse refuses to pay, your credit rating may suffer the consequences.

The best resolution is for you and your spouse to reach an agreement before your divorce. You and your spouse may be able to refinance some loans to remove each other from those accounts before taking on the responsibility of paying the debt alone. Paying off as much debt as possible before heading to divorce court is always a good plan of action.

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