What you need to know about debt and divorce

| May 27, 2021 | Family Law |

Untangling marital assets can be quite an involved task. Things get even more complicated when divorcing couples also need to figure out what to do with their jointly owed debts. Some people in North Carolina might be under the impression that debts are divided evenly, or that only the people whose names appear on the accounts will be responsible for repayment. However, when it comes to dividing debts in a divorce, this is not always the case. 

Whose debt is it? 

Although there are a few exceptions, assets and property that couples acquire during marriage are considered marital property. This includes debt. This means that even if a specific debt is in just one person’s name, or if only one person racked up debt on an account with both spouses’ names, the debt is still considered joint. Some debts that commonly show up during the property division process include:

  • Mortgages 
  • Auto loans 
  • Credit cards 

Mortgages and auto loans are considered secured debts. Nonpayment is “secured” by the physical asset — either the house or the car — and can be recovered by the lender. During divorce, the spouse who keeps the secured asset is generally also responsible for the associated paymentSo the spouse who keeps the car would pay off the auto loan, and the same for the person who keeps the house. However, keeping the family home frequently involves securing a new mortgage. 

Unsecured debts like credit cards are a little more flexible when it comes to division. For example, one person might be ordered to repay a credit card or personal loan even if his or her name is not on the account. There are drawbacks to this though, as creditors generally come after the person whose name is on the account for nonpayment, not the person who was ordered to pay it off in the divorce decree. 

Divorcing couples should not necessarily expect to split their debts 50/50. In North Carolina, marital assets are divided equitably during divorce, not equally. As such, a fair division of marital assets might include one spouse having to pay back a higher portion of debt.