Divorce can feel like a storm that upends every aspect of your life. Financial obligations can further complicate the process, causing additional challenges for both parties involved. Despite this, awareness of how debts are settled during divorce may help in weathering this challenging time.
Dividing marital debt
In Maryland, courts follow the principle of equitable distribution when dividing assets and debts during divorce. This doesn’t necessarily mean a 50-50 split but rather a fair division based on various factors. The court considers several factors when dividing marital debt. These can include each spouse’s income, the circumstances surrounding the acquisition of the debt and each spouse’s ability to repay the debt.
The courts consider debts acquired during the marriage to be marital debts. This is regardless of whose name is on the account. It means that credit card balances, mortgages, and car loans could be subject to division, regardless of whether only one spouse made the purchases or signed for the loan. Separate debts, on the other hand, are those incurred before the marriage or after separation. The spouse who obtained these debts typically remains responsible for them.
Strategies for handling shared debts
When it comes to settling debts, divorcing couples have several options:
- Pay off debts before finalizing the divorce: This clean-slate approach can simplify the process but may not be feasible for everyone.
- Divide debts equitably: Spouses can agree to take responsibility for specific debts, ensuring each party’s share is fair given their financial circumstances.
- Sell assets to pay off debts: In some cases, couples may decide to liquidate shared assets to clear outstanding debts before proceeding with the divorce.
It’s important to note that creditors are not bound by divorce agreements. If an ex-spouse fails to pay a debt they agreed to handle, the creditor can still come after both parties if the debt was jointly held.
Moving forward with financial clarity
Settling debts during divorce can be a complex process that requires careful consideration. The unique circumstances of each divorce may require different approaches for different people. Understanding how debts are settled can make this challenging time more manageable. Consulting a legal professional may help protect your interests and secure your financial future.
