North Carolina, like most other states in the Union, divides marital property and debt under the laws of equitable distribution. This means that a court can make either party directly or indirectly responsible for marital debts incurred in the name of the other, even if only one party's name appears on the debt.
The Definition of Marital Debt
In North Carolina, marital debt consists of all debt acquired by either party between the date of marriage and the date of separation. Any debt you ran up before your marriage or your after separation is your separate debt, which means you are solely responsible for it. The district court judge deciding your property division case can only divide and assign marital debt. While the name that appears on the debt is important in that courts prefer to assign debt to the named party wherever possible, you are presumed responsible for half of all the marital debt in your spouse's name and vice versa.
The Definition of Marital Property
Marital property consists of all property acquired or earned by either party between the date of marriage and the date of separation. Everything else, along with property acquired by gift from a third party or inheritance during marriage, is separate and therefore indivisible. As with debt, the name that appears on the asset may be relevant to distribution, but it has no bearing on whether or not the asset is marital. Your house, car, retirement accounts and bank accounts can all qualify as marital property even if your spouse never worked a single hour during the marriage to help you acquire them.
Placing a Value on the Marital Estate
The distribution of marital property and debt in North Carolina is based upon the net value of the marital estate. Courts derive this value by adding up all the marital property, then subtracting all of the marital debt. Some "assets," such as cars, boats and real estate, can actually operate as debts in equitable distribution if they come subject to a lien that is higher than their value. In valuing a marital estate, courts will inquire into the balance of all marital debts and fair market value of all assets on the date of separation.
Distribution of the Marital Estate
"Equitable" in "equitable distribution" means "fair." As fair and equal aren't always the same thing, North Carolina courts can award an unequal distribution of the estate in the presence of certain distributional factors set forth in North Carolina General Statutes Section 50-20(c). The judge will try for an in-kind distribution of your estate, which means satisfying a given division by distributing assets and debts in your name to you and those of the other side to your spouse. If a desired division can't be achieved in-kind, a court can order one side to make payments to the other in order to reach that division. These payments can be spread out over six years.
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