Division of marital assets is a central focus of any divorce. Equally important, but sometimes overlooked, is the division of marital debts. Debt that was incurred during the marriage will generally be classified as marital debt, regardless of whether it is in joint names or only the name of one spouse. By contrast if debts either of you had prior to the marriage still exist, they will remain the separate debt of the spouse who originally incurred it. Marital debt is subject to the same laws of equitable distribution in Colorado.
As a result, it is vital that any divorce settlement includes terms for the assignment of debt. It is important to understand how debts will impact your divorce and life after divorce, and the potential consequences for determining child support and spousal support.
At Hogan Omidi, PC, our divorce lawyers work closely with clients in order to ensure their interests are protected in both division of assets and division of debts. We handle divorces in the Denver metro area and throughout the state.
From Kathleen’s interview for the Masters of Family Law series on ReelLawyers.com
Negotiating Division Of Debts And Alternative Solutions
Many couples have at least some debt. Commonly encountered debts include mortgage, car loans and credit card balances, lines of credit, home equity loans, and student loans. Secured debts (collateralized loans) such as mortgages, car loans or home equity loans are commonly addressed along with the asset encumbered by the loan. For example, consideration of whether to keep or sell the home will have to include weighing if or how the mortgage can be refinanced or paid.
If you and your spouse are willing to enter into negotiation to settle your divorce, you may be able to reach an agreement regarding the allocation of marital debt. However, when couples have unequal incomes, it may not be financially feasible to divide those debts in half. Our lawyers can help you explore tradeoffs to balance the overall divorce settlement. For example, the high-earning spouse may agree to pay off an existing credit card or car loan in exchange for the other spouse relinquishing stocks, real estate or retirement funds of comparable value.
What Happens If My Spouse Defaults On Our Credit Cards Or Loans?
If your spouse agrees as part of the divorce to pay off credit card debt or other loans that are in joint names, a creditor can pursue you if your ex-spouse defaults. Their default may adversely affect your credit score, jeopardizing your ability to qualify for a future mortgage, car loan or credit card. Your divorce settlement has no legal or binding effect on your contractual obligations with your creditors. A creditor can initiate a collection action against you, even if you never used the credit card.
However, if your ex-spouse fails to pay off the debt as required by the terms of your divorce judgment, you can pursue remedies in court. Depending on the circumstances of your case, the court may liquidate some of his or her assets or take any other action to enforce the terms of your divorce settlement.
Call Us For Strategic Consideration Of Debt In Your Divorce
Our attorneys can help you determine what to leverage and how to structure your negotiations to reduce your exposure to creditors and protect your credit. For more information regarding the division of marital debt and how we can help you, contact divorce attorneys at the law office of Hogan Omidi, PC, today. Call 303-416-5697 or contact us online.