Fairly dividing assets is an important part of your divorce, and many couples consider this. After all, you want to know who gets the house, who gets the car, and so on. However, not many couples think about how to split their debts.
Fair and equitable division of debt
Remember, Florida is an equal distribution state. The court divides marital assets equitably rather than simply splitting everything 50/50. The fair division also applies to any debts or liabilities. Fair division means the court divides everything based on factors like the length of marriage, respective income and other financial or non-financial contributions to the marriage.
If you had a prenuptial or postnuptial agreement, splitting your assets and debts can be easier. If you don’t have either, you will need to talk it out with your spouse, add it to your mediation or let the court decide for you.
Marital vs. nonmarital debt
Fortunately, the court will not divide all debts between you and your spouse. There are two types of debt, but in most cases, the court only distributes marital debt during divorce:
- Nonmarital or premarital debt, or debt incurred before marriage: This can also be debt gained during your marriage but is only under your name or incurred for personal reasons.
- Marital debt, or any debt taken on and shared during your marriage: This can include house mortgages, car loans, and credit card debt under a joint account.
Possible exceptions to the rule
Dealing with marital debt during divorce is not always black and white. Sometimes, the lines between marital and nonmarital debt can be blurred. Below are two examples:
- Student loans during the marriage: Because of when you gained the debt, the court may consider it as joint or marital debt. The case for this is stronger if you take the loan out to further your career and better support your family.
- Refinanced premarital debt: If you or your spouse refinanced existing debt during your marriage, it can become marital debt and split equitably.
- Commingling debt: Commingling happens if you mix marital debt with nonmarital debt. A good example is using joint or marital funds to pay for nonmarital debts, like student or car loans.
Protect yourself from unwanted debt during divorce
Taking on unwanted debt during your divorce may hurt your credit score. Keeping correct and up-to-date records of your finances, both personal and joint or marital, may help protect yourself. It is also crucial to be fully transparent about your assets and debts during any divorce talks, whether it is a formal court proceeding or a mediation.
You may also be tempted to withdraw half of the money and remove your name from joint accounts and credit cards. However, all assets are typically frozen during the process to accurately determine all debts and assets. It’s best to seek professional counsel before doing this or making other major decisions.