If you’re getting divorced, you are likely going through a major upheaval on many fronts, including your financial life. You may wonder (and worry) about how your debt will be managed. For instance, will you wind up responsible for what your soon-to-be former spouse owes?
The answer will depend on when those debts were incurred (i.e., before or after you got married), the nature of the debt, as well as what state you live in. Here’s what you need to know about how debt is split in a divorce.
Table of Contents
Key Points
• In community property states, most debts from the marriage are equally shared by both spouses.
• Common law property states typically hold the account holder responsible, but courts can assign partial responsibility.
• Pay off or refinance shared debts before divorce to simplify asset division and reduce financial ties.
• Document the separation date and negotiate a fair debt settlement to protect credit and clarify responsibilities.
• After divorce, separate joint accounts, create a new budget, and monitor credit to maintain financial stability.
Community Property vs Common Law Property Rules
How assets and debt are divided in divorce largely depends on whether you live in a community property state or a common law state. These legal frameworks determine whether debts incurred during marriage are considered jointly owned or individually held.
Community Property States
In community property states most debts (and assets) acquired during the marriage are considered jointly owned, regardless of whose name is on the account. That means both spouses are typically equally responsible for all debts incurred during the marriage, even if one spouse did not contribute the debt.
For example, if one spouse racks up $20,000 in credit card debt during the marriage — even if it’s only in their name — both partners may be held equally liable in a community property state. Debts taken on before the marriage or after separation are typically treated as separate liabilities, but timing and documentation are critical.
These rules generally apply unless both spouses agree to a different arrangement or the court finds a compelling reason to divide up debts in a different way.
Community property states include:
• Arizona
• California
• Idaho
• Louisiana
• Nevada
• New Mexico
• Texas
• Washington
• Wisconsin
Alaska, Florida, Kentucky, Tennessee, and South Dakota allow couples to opt into a community property system if they choose.
Common Law States
Most U.S. states follow common law property rules. In these states, debt responsibility is determined by whose name is on the account or who signed for the loan. If a debt is only in your spouse’s name and you didn’t cosign, you’re usually not liable for it.
However, there are some exceptions. Even in common law states, courts can assign debt responsibility based on broader concepts of fairness, especially if the debt benefited both spouses or was used to support the family.
💡 Quick Tip: A low-interest personal loan can consolidate your debts, lower your monthly payments, and help you get out of debt sooner
End of Debt Accrual
One crucial consideration is when debt accumulation legally stops. In most cases, the date of separation — either physical or legal — acts as the cutoff point for joint debt responsibility. Any debt incurred after this date is typically considered separate, assuming proper documentation is in place.
That said, the rules may vary by state. In some jurisdictions, debts continue to be shared until the divorce is finalized. It’s vital to document your separation and keep clear financial records from that point forward.
Recommended: How to Pay for a Divorce
How Is Debt Split in a Divorce?
How debt is divided in divorce can also vary depending on the type of debt. Here’s how common types of debt are typically handled:
Credit Card Debt
Credit card debt can be particularly tricky, especially if the couple used joint cards or shared authorized access. In community property states, credit card debt accrued during the marriage is generally shared, no matter whose name is on the card.
In common law states, the person whose name is on the account is typically responsible. However, if both spouses benefitted from the purchases — say, for groceries or vacation expenses — the court may still assign partial responsibility to both parties.
To protect yourself, consider paying off joint cards before divorce or freezing them during proceedings to prevent additional charges.
Mortgage Debt
Mortgages are often the largest debt shared by divorcing couples. If both names are on the loan and the deed, then both individuals are legally responsible for the payments — even if you separate or divorce.
There are several ways to handle mortgage debt in a divorce:
• One spouse refinances the mortgage in their name and buys out the other’s share.
• The couple sells the home and splits the proceeds (or losses).
• Both parties agree to continue joint ownership for a set period (e.g., until the children move out), with clear terms for payment responsibility.
Whatever option you choose, you’ll want to make sure it is legally documented in the divorce agreement to avoid future disputes.
Student Loan Debt
Student loans are typically considered separate debt if incurred before marriage. If one of you takes out student loans during marriage and you live in a common law property state, those loans typically stay with the borrower.
If you live in a community property state, student loans taken out during the marriage generally become a shared responsibility. One exception: Federal student loans are generally kept with the spouse who took them out, even if it was after marriage.
If you cosigned your spouse’s student loans at any time — whether they’re federal, private, or refinanced student loans — you are legally liable to repay those loans if your spouse can’t, even after divorce.
Auto Loan Debt
If a car loan is in both names, both parties are generally liable, even if only one person drives the car and that person keeps the car after divorce. Ideally, the person who keeps the car assumes the loan or refinances it in their name.
If the loan is only in one name but the other spouse uses the vehicle, it’s essential to clarify in the divorce decree (the document that finalizes the divorce) who will take responsibility for the car and the loan moving forward.
Medical Debt
In community property states, medical debt incurred during the marriage is typically considered joint debt, even if it only involves one spouse. If you live in a common law state, you are typically not responsible for your spouse’s medical debt unless you co-signed on the debt. However, there are exceptions, such as the medical debt that benefited the family.
If one spouse accrued medical debt before getting married, or if the medical bills came after the divorce, that debt typically stays with that person.
Additional Considerations
Here are some other factors that can impact how debt is split in a divorce.
Prenuptial or Postnuptial Agreements
If you and your spouse signed a prenup or postnup that includes provisions for handling debt, those terms generally take precedence over state law.
These legal agreements can specify who is responsible for certain debts and can significantly simplify divorce proceedings, provided they’re properly drafted and enforceable under state law.
Hiring an Attorney
Dividing debt in a divorce can get complicated quickly. Hiring a qualified divorce attorney can help ensure that your rights are protected and that you fully understand the consequences of your decisions.
An attorney can also help mediate disputes, especially when emotions are running high, and prevent you from agreeing to terms that may haunt you later.
Managing Debt After a Divorce
Once the divorce is finalized, the financial journey isn’t over. Managing debt responsibly in the aftermath is essential for rebuilding credit and regaining financial independence.
Negotiating a Fair Debt Settlement
Ideally, you’ll want to negotiate a debt settlement with your ex-spouse as part of the divorce agreement. This might involve trading one type of asset for another or agreeing to pay off certain debts in exchange for other concessions.
It’s important to be clear about which debts are being assumed by each party and make sure the settlement is reflected in the legal documents.
If you can’t come to an agreement, the court will step in and distribute the assets based on state laws, which may be according to community property rules or the principals of equitable distribution.
Separating Joint Accounts
Failing to separate joint debt accounts after divorce can lead to unexpected consequences. If your name is still on a shared credit card or loan, you’re still legally responsible, regardless of the divorce decree.
It’s a good idea to close or refinance all joint accounts and remove authorized users where necessary. This can help prevent future charges and shields your credit from missed payments made by your ex.
Creating a Post-Divorce Budget
A new life calls for a new budget. Financial planning after divorce generally involves:
• Recalculating income and expenses
• Prioritizing debt repayment
• Building emergency savings
• Setting new financial goals
It can be helpful to consult a financial advisor during this transition period to help you get back on your feet and avoid future financial pitfalls.
💡 Quick Tip: With average interest rates lower than credit cards, a personal loan for credit card debt can substantially decrease your monthly bills.
Paying Off Debt With a SoFi Personal Loan
If you’re overwhelmed with multiple high-interest debts after a divorce, consolidating them with a SoFi personal loan could be a smart move. SoFi offers fixed-rate personal loans with flexible terms and no-fee options.
Using a personal loan to pay off credit cards or medical debt can simplify repayment and potentially lower your overall interest rate. This can free up monthly cash flow and help you regain financial control faster.
The Takeaway
Divorce is rarely easy, and debt can make it even more stressful. Understanding how different debts are treated in your state can help you navigate the process more confidently.
Whether it’s dividing credit card balances, negotiating a mortgage transfer, or tackling student loans, it’s a good idea to try to work together to come up with a fair and transparent approach. With the right tools and guidance, you can emerge from divorce financially stable and ready to rebuild your future.
Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.
FAQ
Who is responsible for debt after a divorce?
Responsibility for debt after a divorce depends on state laws. In community property states, debts incurred during the marriage are typically considered jointly owned and equally shared between spouses, regardless of whose name is on the loan or credit card. In common law states, debt during marriage generally belongs to the spouse whose name is on the account or who incurred the obligation.
Can divorce ruin your credit?
Divorce itself doesn’t directly affect your credit score, but how you handle shared debts during and after divorce can.
Missed payments, defaults, or maxed-out joint accounts can have a negative impact on your credit profile if your name is still associated with them. Creditors report payment history regardless of divorce agreements. If your ex fails to pay a joint debt, your credit can also be adversary affected. To protect your scores, separate or close joint accounts and monitor your credit reports throughout and after the divorce process.
What happens to joint credit cards after separation?
Joint credit cards remain legally shared until they are closed or refinanced, even after divorce. This means that both parties are still responsible for any balance, regardless of who made the purchases. Ideally, couples should freeze or close joint accounts and transfer balances to individual accounts. Working with your attorney can help prevent misuse and protect your credit.
Should I pay off shared debt before finalizing a divorce?
It’s generally a wise idea to pay off shared debt before finalizing a divorce. Doing so can simplify division of assets, reduce post-divorce financial entanglements, and protect your credit. When joint debts are left unresolved, it can lead to late payments or defaults, which can negatively impact your credit profile.
If paying off the debt isn’t feasible, try to refinance or transfer it to individual accounts. Discussing debt management in the divorce settlement can help ensure clear financial responsibilities and minimize future disputes.
How can I protect my credit during and after a divorce?
To protect your credit during and after a divorce, start by checking your credit reports and identifying all joint accounts. You might then want to freeze or close joint credit cards, remove your name from authorized user accounts, and monitor payments closely.
It’s also important to work with your attorney to assign debts in the divorce decree. Just remember that creditors don’t honor divorce agreements and will continue to hold you responsible if your name is still attached to a debt.
Post-divorce, you’ll want to establish credit in your own name, pay bills on time, and regularly review your credit reports.
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