Dividing marital debt can be as complicated as applies to dividing assets when a couple divorces. According to Scott Tominaga, how debt is divided in a marriage depends on multiple factors including state laws that drive the division, the type of debt, and the financial situations of both parties among others. Here are the primary elements that determine how debt will be divided in a divorce:
State Laws and Property Division
Debt division typically depends on whether the particular state would follow community property laws or equitable distribution rules. In general, community property involves all debts acquired during the marriage being considered jointly owned, irrespective of who has incurred them or divided on a 50/50 ratio. Whereas, in the case of equitable distribution, the allocation is determined based on what appears to be fair. Here the court looks into so many aspects to fairly distribute the marital debts.
Nature of the Debt
In a divorce, all debt incurred by both parties is not treated as equal. Debts that are opted for during the marriage may include mortgages, car loans, and credit card debts and are predominantly considered marital debts- even if one spouse was the primary borrower. However, debts such as student loans and personal loans taken before the marriage are typically regarded as separate debts, belonging solely to the spouse who opted for them. In certain cases, however, loans availed for joint purposes from joint credit card accounts or personal loans, etc. may sometimes bring confusion in allocation.
Income and Earning Capability of Both Spouses
The financial positions of the spouses are vital factors of consideration in the way debt is apportioned among them. From the viewpoint of Scott Tominaga, courts typically analyze the income, earning potential, and capacity of each spouse to repay debts in deciding how they should share their debts.
Consequently, if one spouse earns a higher income or has a brighter earning potential than the other, the court may instruct the higher earner to bear more of the debt. On the contrary, if a spouse has limited earning abilities especially due to caring for someone, or simply belongs to a lower income bracket than the other, the court may deem it proper to assign more debt to the other spouse.
Contribution to Debt Accumulation
Additionally, courts also judge the roles and behavior of each spouse in incurring debts. So, if it’s found that one spouse has incurred a significant amount of debt without informing or getting consent from the other spouse, the court may hold him/her primarily liable for repaying that debt in full. In terms of spending marital funds recklessly and unwisely if one spouse is found solely responsible for making the financial position bottle-neck by misusing credit cards for buying luxury items; this will play a role in determining how the debt is allocated.
Allocation of Assets and Property
While spilling up marital property, its associated debts need to be taken into consideration. For example, a marital house could be awarded to one spouse, while the spouse might have taken a loan by keeping it a mortgage. Similarly, if the other spouse has received a portion of retirement funds or investments, the division of debt would be adjusted to account for the value of those assets, meaning that both spouses would receive an equal or fair settlement as far as total value is concerned.
To conclude, in certain circumstances, spouses may mutually agree on the mode of dividing both assets and debts via negotiation or mediation. Tominaga considers this kind of settlement brings flexibility and swiftness in reaching a solution rather than depending on court decisions.
