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Dividing debt in divorce

On Behalf of | Aug 13, 2021 | Property Division

We often talk about property division in divorce as a matter of divvying up the assets. This, by itself, is no simple matter, but there’s another aspect of the process that can also be quite tricky, and that is dividing the debt.

Yes, under Michigan law, divorce does not give you a way out of your debt. It may not even get you out of all the debt your ex-spouse got into.

Marital and separate debt

The property division process requires the parties to list all their assets and debts, and then divide separate property from marital property. Generally speaking, assets acquired before the marriage are separate property, and assets acquired during the marriage are marital property. The same holds true for debts. Debt from a car purchase before the marriage belongs to the spouse who bought the car, but debt from a car purchase during the marriage belongs to both spouses.

There are some exceptions to this rule, including gambling debts and debts incurred while pursuing an extramarital affair. There can also be an exception for student loans in some cases. If the loan was for one spouse’s education only, then it is generally considered separate debt. But if the student loan also supported the couple’s household, then it is considered marital debt.

For many married couples, the single greatest asset in the marital property is their family home. Very often, a mortgage on the family home is also the single greatest source of marital debt. The home and the debt are often considered as marital asset and debt even if the mortgage is only in one party’s name. However, if one party keeps the home after the divorce, that party will generally take on the mortgage separately.