What Happens To Our Debt In A Divorce?

debt in divorceOne of the biggest parts of your Virginia divorce will be dividing up property and marital assets. In a recent blog post, I discussed the types of property and how it will be distributed. However, like property and assets, you and your spouse’s debts will also be divided in your divorce. Here is a brief look at how your debts will be distributed.

Equitable Distribution

Virginia is an equitable distribution of property state. This means that property will be divided equally in divorce. However, equally does not mean a 50-50 split. Rather, the court divides according to each party’s contribution to the accumulation of the property.
This same principle applies to the division of marital debts.

Dividing Marital Debts

When dividing marital debts, a Virginia court will consider three factors: (1) the debts and liabilities of both you and your spouse, individually and together; (2) the basis for these debts and liabilities; and (3) the property used as security for these debts and liabilities, if any.

The debts you and your spouse incur separately (titled solely in you or your spouse’s name, alone), either before marriage or during marriage, are presumed to be separate obligations, and will likely continue to remain your separate obligation upon divorce. For instance, if you had a car loan before your marriage that has not been paid-off at the time of your divorce, this debt will likely remain entirely your obligation after your divorce. The same is true for debts you may incur in your sole name during the marriage.

For debts titled jointly in both you and your spouse’s names, each of you will be jointly responsible for payment of the debt. This means that if your spouse does not pay anything at all (despite being required to do so), the creditor can come after you for full satisfaction of the debt.

Though a court will try to divide marital or jointly owned debt fairly in your divorce, or you and your spouse may agree to pay certain debts titled in one or both of your names in your settlement agreement, the court order or mutual agreement will have no effect on third party creditors. In other words, if your spouse agrees or is court-ordered to pay for a debt that is in your name and fails to pay the debt, the creditor can only come after you for payment because you are the named debtor. For this reason, your attorney should include a provision in the court order or settlement agreement that in the event your spouse fails to pay for his or her required debts, you have the right to sue your spouse for any amounts you had to pay the creditor(s). This is called an “indemnification clause.”

If your court order or settlement agreement does not include an indemnification provision, you may be able to petition the court to give you a monetary award for what you paid creditors. However, this will require a court hearing and the presentation of evidence which can be costly and time consuming. For this reason, it is important that you hire a good family law attorney who will protect your interests the first time around.

There are a number of considerations to be aware of when dividing and allocating debts during a divorce. If you are currently going through a dissolution of marriage action or are considering divorce, the family law attorneys at DiPietro Family Law Group are here for you. Call us today at (703) 370 – 5555.

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