Both parties must take multiple factors into consideration during a divorce. The decisions you make throughout the process can have a huge impact on your long-term financial outlook, and this challenge does not just apply to your assets, either. One thing that many couples fail to consider? How they must divide their debts.
Why Dividing Debts Matters
Dividing your debts is every bit as important as divvying up anything else when you dissolve your marriage. For many couples, the process can turn as contentious as dividing the household goods, community property, or other assets.
One spouse may feel that the other contributed far more to those debts, for example, while the other might feel they do not have the income to pay those debts off over time. You may also end up arguing over who took the assets related to the debts, like the house or a vehicle.
Dividing debts correctly can help you protect your finances, which makes it a very important process to get right. The less debt you take out of your marriage, the easier it will prove to manage your financial future — but you must take Virginia law into consideration as you plan for debt and marital property division.
How Dividing Debt Works in Virginia
When you first prepare to file for divorce, you and your ex-spouse have the opportunity to decide how you want to divide those debts. If you can come to an equitable arrangement, you can divide those debts on your own. You may need to take additional steps if you cannot reach an agreement on your own, however.
Virginia law divides debt into three categories: separate, marital, and hybrid debt.
- Separate debt is debt that belongs to one spouse alone, that one spouse acquired before the marriage or after the separation, or that was kept separate from marital funds throughout your relationship.
- Marital debt includes any debt acquired during the marriage itself, particularly joint debt like major purchases you made together or joint credit card debt.
- Hybrid debt may include both categories, such as a separate debt one of you acquired before the marriage but chose to pay down together.
The courts will only divide marital and hybrid debt. If you have separate debt, especially debt from before the marriage, it will remain yours in your divorce.
Factors a Judge Will Consider
Virginia is an “equitable property” state. That means that a Virginia judge will consider the fair distribution of property and debt when a marriage dissolves. It may not represent a perfect 50/50 split.
Instead, the judge will attempt to create a fair resolution that takes into consideration the needs of both parties. Multiple factors may contribute to how your debt gets divided in your divorce.
1. How Each Party Contributed to the Acquisition of the Debt
The role each party played in acquiring that debt can have a huge impact on the debt you hold after the divorce proceedings. For example, if your spouse had serious spending issues but you worked as hard as you could to save and pay down debt, your spouse may acquire a higher percentage of that debt after the divorce process.
2. The Circumstances That Led to Your Divorce
In some cases, a judge may consider the circumstances that led to your divorce when determining what happens to your debt. For example, in circumstances of financial abuse, the abuser may end up with a higher percentage of the marital debt when dividing property.
3. Each Partner’s Income for Equitable Distribution
In some marriages, the two spouses have immensely different incomes for equitable distribution. A judge may carefully consider which spouse brings more money to the table and how the acquisition of that debt will impact the spouse’s future.
4. Each Partner’s Tax Burden and How That Debt Will Impact It
Understanding how debt and repayment for that debt can impact your taxes may have an immense impact on the division of debt during a divorce.
5. Who Kept the Marital Assets Related to the Debt
Do you have debt from a car or home? The spouse that keeps a specific asset will most often keep the debt that goes along with it.
6. The Circumstances Under Which the Debt Was Acquired
Often, a married couple will make decisions about going into debt together that are based on the couple’s combined income, financial stability, and existing assets. When you choose to dissolve your marriage, it can create a dramatic change in your financial status. The circumstances under which you chose to enter into debt can impact the debt you ultimately take out of your marriage.
What If Your Spouse Contests the Division of Debt?
Like the division of assets, your spouse has the right to contest the division of debt in marriage through a divorce attorney. Start by working with your lawyers to create an equitable division of both debt and property. If you cannot reach an agreement, you may go through mediation or, ultimately, take your case to court and allow a judge to determine how you will divide both property and debt during the divorce settlement.
How to Proceed When You Don’t Know How to Divide Your Debt
Dividing debt can cause a number of challenges. Are you and your ex-spouse struggling to decide how to divide your debt? Not sure where to turn with your divorce case? You want to leave your marriage with as little debt as possible to protect your finances, but you need to create an equitable plan for dividing debt so both parties can experience as much financial freedom as possible. An attorney can help you decide how to frame an agreement that works for both of you when divorcing.
Are you moving toward divorce with your spouse? Do you need to know more about the division of debt in Virginia and how it could impact your financial future? Contact the Law Office of Michael Ephraim today to discuss your debt divisions questions, or to speak with an expert about other divorce law-related questions you might have.