What Happens to Debt After a Divorce?

Divorce can be complex and emotionally draining. Beyond the emotional toll, it also brings financial implications, including the division of marital debt. Understanding how to handle debt during and after a divorce is crucial to safeguarding your financial future. A New York City divorce attorney from the Law Office of Vivien I. Stark, P.C. can help you understand the complexities of debt division during and after a divorce and how to protect your financial future.

Equitable Distribution vs. Community Property

The way debt is divided after a divorce depends largely on the state you live in. New York, for instance, is an equitable distribution state, which means that marital property and debts are divided fairly but not always equally. This differs from community property states, where spouses typically split debts and assets 50/50 between them.

Under New York law, marital debt includes obligations incurred during the marriage, regardless of which spouse took on the debt. However, debt accumulated before the marriage or after the filing for divorce is usually considered separate and remains the responsibility of the individual who incurred it.

Types of Marital Debt

Marital debt can take many forms, including:

• Credit card debt: If one spouse charged up credit cards for household expenses, vacations, or other joint endeavors during the marriage, this debt is typically considered marital.

• Mortgages and home equity loans: Loans tied to a marital home may need to be refinanced or resolved if one spouse keeps the house.

• Car loans: If both spouses use or purchase a vehicle purchased during the marriage, the loan may be treated as marital debt.

• Student loans: Student debt is a gray area. Courts may assess whether the education benefited the marriage or only the individual when determining if it is marital or separate debt.

Factors Considered When Dividing Debt in New York

When determining how to divide marital debt, New York courts evaluate several factors, such as:

• Income and earning potential: A spouse with a higher earning capacity may be assigned a larger share of the debt.

• Contribution to the debt: If one spouse was primarily responsible for incurring the debt, courts may allocate it accordingly.

• Benefit to the marriage: Courts examine whether the parties incurred the debt for joint purposes or personal use.

• Spousal misconduct: In some cases, reckless spending or misuse of marital funds may lead to an unequal division of debt.

Protecting Yourself Financially During Divorce

To safeguard your financial future, consider these steps:

• Gather all documentation related to credit cards, loans, and other liabilities to ensure full transparency.

• Check your credit report to identify shared debts and ensure you do not overlook any obligations.

• Close or separate joint accounts as soon as possible to prevent further accumulation of debt.

• Work with our New York divorce attorneys to negotiate debt division in your divorce settlement agreement.

What Happens if Your Ex-Spouse Fails to Pay?

Even if a court assigns responsibility for certain debts to your ex-spouse, creditors are not bound by the divorce decree. You are still legally liable for the debt if your name is on a joint account. This can impact your credit score if your ex-spouse misses payments. To avoid this, consider refinancing or transferring debt into individual accounts during divorce.

Work with an Experienced Divorce Attorney

Dividing debt during a divorce is a complex process that requires a thorough understanding of New York law. At the Law Offices of Vivien I. Stark, P.C., we understand the stakes and are here to guide you every step of the way. If you have questions about dividing debt in your divorce, contact us today to schedule a consultation.