Along with the division of property and debt, divorce also requires the distribution of debt. However, unlike deciding who gets the flat screen television, the debts are associated with legal rights held by third parties (creditors). The creditors’ rights must be factored in when dealing with debt involved in a divorce.
These particular set of rights are established in the contract derived from the debt and allows the creditor to recover payment on the debt from the parties who accepted liability under the contract. Creditors are not allowed to enforce their rights against anybody not associated with a contract.
In regards to divorce, the judge in a family court can’t take the husband’s debt and make it the wife’s debt or vice versa. Debts owned jointly by spouses can’t be split evenly, so they remain 100% joint responsibility of each party involved in a divorce.
A problem that could arise in debt division in a divorce includes one spouse will leave with substantial debt, while the other walks away debt-free, despite the fact that the debts were accrued for the joint benefit of one another. Another is when both parties have joint liability, but if neither spouse pays the bills, then the creditor can come after either or both parties to satisfy the payments.
The following are common solutions to debt division in a Missouri divorce:
- Parties adjust the asset division to account for the debts each party acquires. When assets and property are available that can be fairly divided to cover the debts.
- Refinance the debts. One spouse owes a debt that the other spouse is paying for by changing the creditor’s rights through the creation of a new debt which pays off the old debt; with the new debt is held by whoever is responsible for payment of the old debt.
- Parties indemnify each other. When one spouse indemnifies the other on a debt through divorce, it means the indemnifying spouse will make the debt payments and another spouse obtains the right to sue the indemnifying spouse.
- Pay the debts. Before the divorce is finalized, all debts are paid.
It’s important to understand that each divorce has its own set of unique variables regarding the debts, income, assets, and needs of each party in order to determine a desirable debt plan in divorce. At Smith Law Offices, LLC, our St. Charles divorce attorney possess the comprehensive knowledge of state family law to determine which course of action is best for your situation.