What Happens to Unpaid Debt in a Divorce?

When you file for divorce, you and your spouse must split up all the property either party owns, including any debts. Though the laws governing this process differ among states, you and your spouse must still pay for any unpaid debts in accordance with the terms under which you acquired them. Credit and debt issues in a divorce can be complicated, so talk to a lawyer if you need legal advice.

Property Settlements

As long as you or your spouse has a debt, the court can take that debt into consideration when dividing the property in your divorce. For example, if you and your spouse have a joint credit card with a $4,000 balance, a court can order that you pay your spouse $2,000 to pay for your share of the debt. However, depending on which state you live in and how the debt was acquired, the court may also determine that you are not at all responsible or completely responsible.

Divorce Settlements and Prenups

While you can ask the court to divide marital debts, couples also have the power to do this themselves by coming to an agreement on all marital property. You and your spouse can agree to who becomes responsible for the debts, who pays money to the other to help pay off the debt or any terms you wish to agree to. Also, if you have a prenuptial agreement, often called a prenup, you can use the terms established in it to determine how the debt is divided.

Joint or Individual Debts

When you enter into a debt, you come to an agreement with a creditor over terms, such as the amount of debt and the manner in which you must repay. You and your spouse can enter into debts individually or jointly. Individual debts are generally the responsibility of each spouse, and continue to be so after the divorce. Joint debts, on the other hand, are more complicated. Typically, one party assumes responsibility for the debt or the debt is repaid in full prior to finalizing the divorce.

Creditors

The court's ruling only affects you and the common issues in your marriage. The court, for example, cannot force your creditor to change the terms of the credit agreement because the creditor is not a part of the case. So, when the court divides debts and orders one spouse to pay the other for a joint debt, the creditor can still pursue both spouses regardless of the court's order.