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What is community debt and how is it divided?

On Behalf of | May 18, 2023 | Divorce, Property Division

Different states have varying laws when dividing property and liabilities. They also have provisions when you begin discussing how to divide debt. If you cannot agree with your ex regarding debt, the court could help decide for you.

Typically, the court determines which debt is community and splits them based on local divorce policies. The general rule of thumb is that debt is community if you and your ex obtained them during the marriage. These debts could include:

  • Credit card debt: It could include debt in joint and individual accounts. The responsibility to pay for personal credit card debt could vary, depending on how the owner used it.
  • Mortgages: This type of debt is more complex, depending on the details used to acquire it. The divorcing couple might refinance the debt or sell the home for proper distribution.
  • Car loans: Whoever gets the car might be liable for the loan. However, the divorcing couple could also sell the vehicle as needed.
  • Student loans: The division of student loans could depend on the local state laws. The court might decide who is liable based on different considerations, such as who has been paying for it and who benefits from the degree.
  • Personal loans: If deemed as community debt, the court could consider diverse factors to divide them such as each party’s potential income, the value of separate assets and who benefitted from it.
  • Medical debt: Divorcing couples could discuss their division based on what works best for them. If not, the court could make the decision.

Additionally, the court could move around debts to help accommodate spousal support. Divorcing couples could also discuss and set agreements to make the debt easier to manage.

Planning could help keep debts under control

Another option for divorcing couples is paying off and rearranging debts before the divorce. Doing so could give more flexibility when managing significant assets.

Collaboration could also help each party determine which debt they can handle while complying with local divorce laws. Otherwise, they could try mediation or let the court settle debt issues.