How Is Property and Debt Split in a Divorce?

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A divorce can be a trying time with the dissolution of a marriage and, in some cases, the breaking of a family. Going through divorce proceedings can lead to questions about everything from alimony to visitation rights. There are also questions as to how property and debt are divided up after the marriage ends. Here are some ways that a divorce can be finalized, and a remedy can be put in place to settle these financial issues.

Legal Liability for Property and Debt


Throughout the United States, there are variations in litigation to work out these settlements from divorce. In community property states in the U.S., debt created during the marriage isn’t necessarily going to be divided according to who incurred the expense in the first place. In other states where equitable distribution is in effect, the court will assign debt responsibility based on the person who ran up the debt. This usually assigns property and debt to people who purchased the lot or impacted the bottom line with their outstanding debt.

The division of property and debts can be incredibly problematic. However, a credit card agreement or loan contract could supersede a divorce decree. This is considered a breach of contract if not properly accounted for. The banks will expect the person who agreed to the term of a contract to be responsible for repaying a debt. This deviates under certain deeds, depending on loan applications. Housing can become stickier ground if children are involved at the time of the divorce, or if there are multiple properties.

Working Out Ownership


In some cases, spouses getting divorced will try to work out with whom the debt lies to avoid any bad faith. This isn’t easy if you share credit cards or loans. This can also be impacted by transferring balances between cards or consolidating balances under a loan. This hard work could however spare you from prolonged discussions in a court of law or through mediation. A lender may not see it as a breach of a contract if you are transparent about the divorce decree, stating responsibility for mortgage payments or other debt being covered under that agreement.

Attorneys may opt to sell off properties or work out settlements between parties to make sure that any outstanding debt is accounted for after the sale. This is usually a common remedy to make both parties in a divorce feel like they are getting into a clean slate. This usually becomes more complicated for property owners with multiple homes or other assets. This could be worked out with different terms of the agreement, especially if there’s a pre-nuptial agreement in place.

Past and Future Debt


In working through the circumstances of the case, divorcees will want to make sure there’s a deviation from any financial obligations. For example, a person will want to have their names off part of the contract to a loan if a spouse has prior issues with bankruptcy, as to not expect their future quest for a loan or credit card. This can also be done regarding business contracts that may have been established prior to the split.

Divorcees may reach an agreement to allow for a commercial roofing company to continue work on a property they own despite the marriage ending. This will ensure quality workmanship is done on the roof, preventing greater damage, while keeping things professional amid the split. After all, a leak or other significant damage to the roof system can lead to other compensatory damages down the line being owed to tenants. That will then delve into deeper issues in the original contract over how to split those claims. At the end of the day, clarity and transparency is key to making a settlement work.

Ahmed Guillen leads OI's editorial staff. He is passionate about professional development and helping our readers navigate starting and enhancing their businesses and investments.

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