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What Happens to Debts During a Divorce?

by | Aug 9, 2022 | Firm News, Uncategorized |

You and your spouse have acquired many types of property over the course of your marriage. While most people are aware that marital property includes the house, furniture, cars and other purchased items, you may not realize that joint debts also fall under assets that are divided in a divorce

Our Michigan divorce lawyers are familiar with the kinds of marital debts and how they are divided fairly according to Michigan’s equitable distribution policy. If you are seeking a divorce, call an attorney at the Law Offices of Michael A. Robbins to discuss the specifics of your case. 

What Debts Are Considered Marital Property?

Marital property refers to the assets you and your spouse obtained when you were married. It does not matter whose name is on the title: unless it was gifted or inherited, it is considered marital property and owned jointly. Similarly, marital debt includes that which was incurred during the marriage, which often includes: 

  • Mortgage
  • Medical
  • Auto loans
  • Joint credit cards
  • Medical debt

An attorney can help you determine which debts are jointly owned and which are their own separate property that each party will be responsible for. 

How Are Debts Divided?

Michigan is an equitable distribution state. The main provision of this policy is that debts are divided fairly, but they are not necessarily split to a perfect 50-50. For example, if one spouse was a stay-at-home parent while the other spouse brought in the main source of income, an equal division of assets would not be fair. Unless each party agrees to share them, their earnings-related assets are regarded as separate property. 

Just like assets, debt is categorized as marital and non-marital depending on whether it was incurred during the marriage or existed beforehand. There are several factors impacting how marital debts are divided: 

  • Each Spouse’s Ability to Pay the Debt. The court will consider each party’s income and potential earning capacity to ensure that they will be able to handle their share of the debt.
  • How and Why the Debt Was Generated. In certain cases, the reason the debt was incurred is also considered, such as if it was generated during an affair or due to a gambling problem.
  • Division of Property. When dividing marital property, such as a car, likely, the loan will also be transferred to the spouse who receives the property.

There are other specific circumstances in which debts may be distributed differently. For instance, even though the divorce court can help determine how debts are shared between parties, creditors are not obligated to recognize these orders. Furthermore, when ending a marriage less than five years old, the court may return each party to the financial status they had before they were married so that the debts are divided according to the same amount they brought into the marriage. 

Contact a Knowledgeable Divorce Attorney

If you are seeking a divorce and need to determine how your debts will be divided, a divorce attorney is a key part of protecting your best interests. Contact the Law Offices of Michael A. Robbins to schedule a consultation to go in-depth into your case.