Understanding the Division of Marital Debt in Divorce

During a divorce, a couple must reach numerous legal agreements regarding child custody, alimony payment, and the division of assets and debts. Dividing debt can be a complicated process as it revolves around a touchy subject: finance. This guide aims to expand your understanding of the division of marital debt in divorce.

What Is Marital Debt?

Getting legally married means sharing your life with someone. In doing this, you also share assets, liabilities, and debts with your spouse, sometimes even after you end the relationship. In Colorado, any debt a couple incurs during the marriage is considered marital debt. Debts incurred before marriage, such as student loans, can remain separate.

Most of the debts you incur during your marriage are marital property. During divorce proceedings, judges strive to divide all marital property and debts fairly to keep the split equitable. Despite this, if one party was financially dishonest and acquired debt without their partner’s knowledge, the other party is not held responsible.

What Is Sole Debt?

Any debt a partner incurs before or during their marriage that is only in their name can be considered sole debt. Typically, for a debt acquired during a marriage to be considered sole debt, the debt must be acquired without the knowledge of the other spouse. However, an exception exists under the Family Purpose Doctrine that can cause this debt to be considered marital debt. This exception falls into place if the acquired debt benefits both parties.

Student loans are a good example of sole debt, especially if the individual acquired them before marriage. However, under the Family Purpose Doctrine, student loan debt that was acquired during the marriage, even without the other party’s knowledge or approval, can be considered marital property if the result of one party incurring student loans benefits the other party (i.e., increased salary or expanded benefits from a job).

For the most part, sole debts are easy to identify and assign to the appropriate party when dividing debts and assets. When there are questions as to whether debts are separate or marital, it is always useful to consult with an attorney to help navigate this aspect of your case.

Jones Law Firm, PC

Jones Law Firm, PC, has property settlement lawyers who can help you navigate the complexities of marital debt’s impact on your divorce.

Types of Marital Debt

There are several forms of marital debt that a couple may incur during their marriage, including:

  • Credit card debt
  • Car loans
  • Mortgage loans

Depending on circumstances, couples may also incur tax debt if one or both spouses failed to pay income taxes. Likewise, if one or both partners run a business, they may also have debt. Keep all financial information regarding these debts in order so that you can present them during your divorce case.

The Impact of Debt on Divorce

During your marriage, you and your partner may have shared a joint account to repay debts you consider shared, such as your house or cars. When you divorce, you must list all assets, debts, and other financial information. Never attempt to hide finances from the other party, your lawyers, or the courts, as doing so is illegal and can result in court sanctions.

The ease of dividing your debts depends on whether you have an amicable or contested divorce.

Dividing Debts in Amicable Divorce

If you and your soon-to-be ex agree to the split, you may work with a mediator and attorneys to independently determine how you’ll split each debt. Generally, this is ideal because you will both have more say over the outcome. While you may legally share the debt of one of your cars, you may choose to consider the car as legally belonging to one party during the divorce. 

In the best situations, both parties can compromise and agree on dividing debts, assets, and other terms of the divorce. However, this isn’t always the case, and an amicable divorce can become contested if you cannot come to an agreement. If this occurs, you both may have to go to court, and the judge will make the necessary legal decisions on your behalf.

Dividing Debts in Contested Divorce

Every state is different, but in Colorado, judges keep things fair and divide marital debts based on equity. Splitting up debts based on equity rather than equality means judges review individual factors of the couple, such as:

  • Each spouse’s income and potential earnings
  • The length of the marriage
  • Each spouse’s contribution to the acquisition of the debt

This makes it easier to divide debts and assets in a manner that’s fair to both partners. Colorado courts do not split things 50/50 because doing so may lead to one spouse having a disproportionate amount of debt compared to the other.

Divisions Based on Equity

Key areas such as income help judges determine how to divide debt because they can base the division on a percentage of earnings. For instance, if one partner brings home $40,000 per year and the other brings home $80,000 per year, having both pay the same monetary amount would be unfair. Instead, the higher earner will likely pay a higher percentage of the debt. However, this decision also depends on other factors, such as each spouse’s contribution to the acquisition of the debt.

Protect Your Financial Rights

Defending your rights should always be a priority when exploring the division of marital debt in divorce. One of the ways you can do this before a divorce is to sign a prenuptial or postnuptial agreement and consult an attorney immediately.

The Importance of Prenups and Postnups

A prenup is a legally binding document that a couple may sign before getting married. It outlines how the couple will divide specific assets or debts in the event of a divorce. Keep in mind that these are assets or debts acquired before the marriage.

A postnup aims for the same goal as a prenup, but couples legally draft and sign it after getting married. Couples may do this to protect inheritance. They may also create a postnuptial agreement if one partner starts a business during their marriage, but their spouse plays no role in it.

Having a prenup or postnup in place can provide peace of mind and protect both parties during a divorce. However, you should consult an experienced family law attorney during your divorce, even if you have legal documents detailing how you’ll divide specific assets.

Consult a Family Law Attorney

It’s always best to have legal representation in court, as this helps protect your rights and makes it easier to achieve your desired outcomes. State laws are complicated, and divorce can be stressful. By working with an attorney, you gain more insight into Colorado’s family laws and have an expert advocating for your best interest.

Hire an Attorney in Colorado

Jones Law Firm, PC, has a knowledgeable team of family law lawyers and over 20 years of experience serving Colorado residents. When we work with a client, we take a personal interest in their case and collaborate as a team to reach their goals. Schedule your free consultation with our team to begin discussing your case.

Understanding the Division of Marital Debt in Divorce

The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship.

Our team includes attorneys licensed to practice in multiple states including April D. Jones in California, Patrick G. Barkman in Texas, the Cherokee Nation, the Northern District of Texas, and the District of Colorado (United States Court of Appeals 10th and 5th Circuit).