Most individuals focus on assets during the property division phase of a divorce, perhaps because they are easy to identify and evaluate. However, it’s equally important to consider and address debts that may also be subject to division, such as joint credit card debt, auto loans and mortgages.
Louisiana is a community property state. Spouses equally own all the assets and liabilities acquired during a marriage, which means you may have to shoulder a portion of the community debt upon divorce. However, dividing these debts is not without its complications, as explained below.
Determining the nature of some debts
Correctly categorizing debts is crucial to ensuring a fair division and avoiding unnecessary financial burden on either spouse. However, this is not always straightforward. It can sometimes be difficult to tell whether a debt is part of the community debt, especially if its origin or use is unclear.
It can be the case if one spouse took out a loan and used part of it for personal investments or expenses unrelated to the marriage. Determining if such a loan qualifies for division and to what extent can be challenging.
Addressing different types of debt
Not all debts are similar, from secured loans and medical debt to unsecured credit card debt. Each financial obligation has its unique implications and considerations that require different approaches to division. For example, deciding who retains the marital home after divorce can impact how associated debts, like mortgages, home equity loans or outstanding liens are allocated.
The risk of non-compliance by your ex
A divorce decree does not affect the rights of creditors. As such, you are still liable for debts you’re co-signed to, even if they are allocated to your ex post-divorce. If they default, it could damage your credit score, and creditors can begin recovery actions against you.
Divorce is such a high-stakes process with far-reaching consequences on your financial future. You could lose out on a lot if the settlement is unfair, leaving you with significantly fewer assets or more debt than you deserve. It underscores the need for qualified legal guidance from the onset of your divorce to understand your rights and protect your interests.