The division of marital debt is a major point of contention during divorce proceedings for many couples. Disputes over debts are furthered by the confusion over which spouse should be responsible for which debt. To divide marital debt, the parties must first determine what rules should apply, which depend on which state has jurisdiction over the divorce matter. The parties must then establish which debts were secured prior to the marriage, during the marriage and after the marriage.
Communal Property States
Communal or community project states are states that follow civil marital property regime laws, so called because of the "communal" stance these states take when considering property and debt division. In communal property states, marital debt (like property) is owned "jointly"; that is, each spouse has a total but equal share of all debt. Absent a prenuptial agreement, all marital debt is divided in half and each spouse is responsible for an equal portion. The amount of income each spouse earns has no effect on this division.
Common-law states are states that don't follow civil laws; instead, they follow previous case law to determine how marital property should be divided. In common-law states, debt division relies on multiple factors, including who secured the debt and who is more capable of paying the debt. The spouse who receives a higher share of responsibility for the debt is also likely to receive a higher portion of the property during the division.
Marital debt encompasses all debts that accrued during the length of the marriage for the benefit of both spouses and/or the family. Marital debts include the mortgage or rent for the marital home, as well as equity loans and credit used to purchase items for the marital home, such as furniture or appliances. Marital debt is the responsibility of both spouses and is divided between the spouses depending on the jurisdictional state's division rules.
Property owned by one spouse prior to the marriage that then became marital property is called transmuted property. By extension, any debt attached to the property becomes transmuted, as well. This means that while the debt may have been separate prior to the marriage, it has since become the responsibility of both spouses. Transmuted debt is subject to division during the divorce settlement.
Individual debt, also called separate debt, is any debt secured by one spouse prior to the marriage. Educational loans and auto loans are common examples of this type of debt. It's not uncommon for these debts to enter the marriage, but unless the property purchased with the debt transmuted during the marriage, the spouse who originally secured the debt is solely responsible for paying it. Individual debts are not subject to division.
Debt After Divorce
Debts secured during or after the divorce proceedings are also considered individual debts. These debts are determined by establishing the date on which the parties initially separated. If there was no separation prior to filing for divorce, the date on which the divorce was filed becomes the date of determination. Any debts incurred after this date become the responsibility of the spouse who secured them. Debts incurred after the divorce aren't subject to division during the divorce settlement.
Prenuptial or premarital agreements that explicitly define the division of the marital debt during divorce prevail over the laws of the jurisdictional state. If you and your former spouse entered into a prenuptial agreement that details how debts shall be divided in the event of a divorce, you're bound to the terms of the agreement. Notwithstanding, neither spouse is responsible for any debts incurred after the date of actual separation.