Is There A Fixed Formula For The Division Of Debts In A Divorce?
There is not a rigidly fixed formula for the division of debts in a divorce (note: if the parties are not married, but are living together, the Court will not divide the parties’ debt by court order unless the parties reach a written agreement). There is a rule of thumb or a tradition that the court will begin with the assumption that all marital debt should be divided equally.
Under What Circumstances Will Debt Be Considered To Be Shared Debt In A Divorce?
Any debt that is incurred during the marriage is going to be considered marital debt. Any debt incurred prior to the marriage will generally be considered separate debt belonging solely to the person who incurred it. UCA § 30-2-5 defines separate debt. However, there are some notable exceptions to what is considered separate debt by the court. If the debt was incurred as family debt or family expenses before the date of the marriage, then each side could be on the hook for that debt. For example, if an unmarried couple incurred debts related to a child’s birth or medical expenses and then they later became married, then each party would presumably be obligated to pay an equal portion of those family expenses.
When Are The Debts Solely The Responsibility Of One Spouse Alone?
When debt is considered separate, when it is non-family debt that was incurred prior to the date of the marriage, or when incurred by one party after the date of the separation. However, depending on the type of debt and the reason that it was incurred, the court has the discretion to order the non-incurring party to pay a portion of the separate debt.
What Factors Does The Court Consider When Dividing Debts In a Divorce?
The court will begin with the presumption that a joint debt or marital debt could be equally divided. However, the court may assign a greater portion of the debt to one party as part of the global property-support-debt distribution analysis. For example, if one party is being awarded a greater share of the marital property, the court may also award that person a greater share of the marital debt as a compensating measure. If one party has the ability to pay the debt and the other party does not have the ability to pay the debt, then the court may order that a greater portion of the marital debt be paid by the party who is able to do so, and as a compensating measure they may reduce the amount of spousal support owed by that same party.
Does The Court Intervene If The Parties Mutually Agree On Debt Division?
No. In fact, most of the time, parties will come up with more creative and better agreements than might be imposed by the court, assuming that both parties are negotiating from a position of equal strength. If the parties agree to a debt distribution, generally the Court will ratify that agreement.
Does The Person Keeping The Item Have To Pay Off The Debt?
It would be unusual for a large asset to be awarded to one party while the debt on that asset is awarded to the other party. However, sometimes car or home loans are joint debts whereby both parties are obligated on the debt. If the party who has been court-ordered to pay the debt fails to do so, that will negatively impact the credit of the other party. If a party is obligated on a home loan or a car loan that has been awarded to the other side, then that will negatively impact their credit and reduce their ability to obtain a loan. Therefore, courts will often award a home or car loan to a party who will be required to refinance that asset within a reasonable period of time in order to remove the other party’s name from the loan.
If the party who has been ordered to refinance an asset fails to do so in a timely manner, then the court will often require that the asset be sold and the proceeds used to pay off the loan on that asset. This is so that the other party does not suffer negative consequences to their credit and is not sued by the creditor for a failure of the debt to be paid.
Does Anyone Ever Have To Pay Debt Incurred By Their Spouse Prior To Marriage?
Generally no. Very rare exceptions exist.
If One Spouse Makes More Money Will They Be Responsible For More Debt Than The Other?
The court will begin with the presumption that the debt should be equally divided. However, in making a final property division and support award, the court has the discretion to award one party more debt than the other in order to compensate for that party receiving a greater amount of the personal property or a reduction in the amount of alimony that must be paid.
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