When you decide to get a divorce, you and your spouse will need to separate your whole lives in two. You probably know that you will create a plan to parent your children together from two different households. You also likely know that you will have to divide your property. What you may not realize is that the law includes debt in the division of property.
According to U.S. News and World Report, the court will typically consider joint debt the responsibility of you and your former spouse while any debt you hold only in your name will be your responsibility. The order from the court is legally binding and requires that you pay the debt even if you did not incur it.
Division of debt
The court divides debt just as it divides property. In fact, debt will play into property division. It can reduce the value of the property you receive. The court may award additional property to you if you take on more debt, or you can use debt to reduce the value of the property you receive to make it more equal with the property your former spouse receives.
This is handy if you want something especially valuable, such as a family business. You can take on extra debt to reduce the overall value and make it equal to the assets your former spouse will receive.
Ultimate responsibility
The important thing to note about the court order versus the debt contract is that the court can tell you that you must pay a debt, but it cannot remove the liability for the debt. For example, if you and your former spouse have a loan that you both signed the contract on and the court orders your former spouse only to pay the loan, it does not remove your liability for the debt in the eyes of the lender. The lender can still hold you responsible for paying the debt and report negatively on your credit report if your former spouse does not pay it.