Unsecured Debt in Divorce

Most Americans carry credit card debt. In fact, the average American household has about $5,000 of just credit card debt. “Unsecured debt” is the legal term for debt that is not associated with collateral, like a vehicle loan or a mortgage would be. Credit card debt, medical debt, and student loans are three very common types of unsecured debt. When a divorce is pending, this debt must be properly characterized as either marital debt or separate debt so that it can be properly divided in the final decree.

As with the assets in the divorce, credit card debt that was incurred before the marriage took place is typically is separate debt. This means that whoever accrued that debt before the marriage is the one who will be responsible for it. Likewise, credit card debt that was incurred during the marriage is a marital debt and must be divided. This is true even if only one spouse’s name is associated with the credit card.

If the debt was incurred during the marriage for marital expenses, the debt is part of the marital estate. Marital expenses include everything from food to bills to clothes. There are exceptions to this. For example, if one spouse can prove the debt was incurred solely for the benefit of running up debt just to hurt the other spouse, it is quite possible that the wrong-doer will end up being solely responsible for that debt.

Student loans are also a common issue in divorces. Student loans incurred before the marriage generally will be the responsibility of the person who got the loan. If a student loan happened during the marriage, the debt is technically a marital debt. However, if only one spouse is the one who receives the benefit of that loan, then it is possible that a court will require that benefitting spouse to be completely responsible for paying back that debt.

Medical bills incurred during the marriage are also marital debt. Typically, the court will divide the medical debt equally between the spouses. This is true even if the debt was incurred for the sole benefit of just one spouse.

Adding further complication to the division of debts is whether the spouses had a “committed intimate relationship” prior to getting married. If they did, then it is quite possible that much of what otherwise would be considered separate debts will be viewed as community debts to be divided.

Division of debts in divorce is an important aspect and cannot be overlooked. Our team has much experience in reviewing debts and helping our clients’ financial futures. Call us today at (253) 272-9459 to talk about your divorce.