According to the Census Bureau, about 49% of marriages end in divorce. Going through a divorce can mean a lot of lifestyle changes on the horizon, including lifestyle changes when it comes to your finances. There are a lot of things that have to be addressed during a divorce, with debt being very high on the list of things to work out. Here is what you need to know about debt and divorce.
Uncontested Divorce? Debt Still Needs To Be Addressed
According to NOLO, an uncontested divorce is when both partners agree to divorce. In these cases, negotiation or litigation is typically not needed, but debt still needs to be discussed before the final divorce decree is signed.
Who will pay what? There is about $15.8 trillion in mortgage debt in the United States. Most married couples are equally responsible for that type of debt. Once the marriage is dissolved, someone will need to take responsibility for the debt. This can be a bone of contention for many divorcing couples, especially if children are involved. The custodial parent may want to keep the house to ensure the children are able to continue the lifestyle that they are used to. However, they may not be able to afford the mortgage payment on their own.
More information is given about “contractual obligations” under a mortgage instrument and other contracted debt. Not being able to afford your part of the mortgage or not having a plan for paying off the debt does not release you from the responsibility of the debt.
Uncontested divorces do not mean you do not have to have conversations about debt. Each partner is entitled to create a lifestyle that is comfortable for them, but that can be hard when one partner is stuck with a lot of marital debt.
Responsibility for Debt Can Vary By Your Location
If you live in any of the nine community property states, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin, both partners are equally liable for debt incurred by either partner. In some states, couples have the choice of sharing community property. Where you live will determine how debt is handled in your divorce case.
Your lifestyle can be greatly impacted by the debt that your partner amassed during your marriage if you live in a community property state. In some cases, if you can show that the debt was misappropriated and you did not benefit from the debt, you can be released from the debt. For example, if your partner’s lifestyle was built around gambling and they used their AMEX card to rack up substantial debt in Vegas, you may be able to fight that debt.
Marital Contracts for Debt
Not all debt is unsecured, some important debt is secured. For example, the car you drive that supports your lifestyle may be a contractual debt if both you and your partner sign for the vehicle financing. The financing company or the bank is not going to divide the debt up for you. You are both equally responsible for the debt.
The same is true of your mortgage. According to the National Association of Realtors, in 2019 about 5.34 million pre-existing houses were sold. Most of them were purchased using a mortgage. You and your partner likely purchased your home with a mortgage as well. The bank does not care if you are divorcing. All they care about is getting the money you and your partner agreed to pay.
Working Through the Debt
Divorcing can affect your lifestyle for the next few years as you and your ex-spouse tackle some of the marital debt that is left behind. You may have to make some lifestyle changes until you get back on your feet. A good attorney can help you to sift through the debt and get your lifestyle back on track. Divorce can get complicated; it is not something anyone should navigate on their own. Speak to a divorce lawyer to learn more about your rights and responsibilities when it comes to marital debt and divorce.