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How Are Different Types of Debt Divided in a Couple’s Divorce?

 Posted on March 29, 2022 in Divorce

IL divorce lawyerThere are a variety of financial issues that will need to be addressed during a divorce, including determining how to divide the property a couple owns between the two spouses. However, during the property division process, a couple will also need to consider the debts they owe. Just like the assets a couple owns, the amounts that are owed to creditors will need to be allocated between the spouses. However, it is important to understand how different types of debts may be handled, as well as the factors that may complicate things during or after a divorce.

Division of Secured and Unsecured Debts

It is important to remember that assets and debts do not need to be divided exactly equally. Illinois law requires a “fair and equitable” distribution of marital property. Depending on the decisions made about certain types of assets, each spouse’s overall financial situation, and other factors, the final decisions on how to divide debts may vary. While they work to reach agreements on these issues, a couple will need to consider how different types of debts may be handled.

Balances on credit cards are some of the most common debts that couples will have. Any balances on a joint credit card will typically be considered marital debts, although even if a card was only in one spouse’s name, purchases made using this card while a couple was married will also usually need to be considered during the property division process. Credit card purchases that may not count as marital debts include those that may be considered asset dissipation, meaning that they were made by a spouse for their own sole benefit after the point at which their marriage had broken down beyond repair. Charges that occurred after a couple’s legal separation but before their divorce will also be considered separate property.

It is important to note that if both spouses were included on a credit card account, they will both be responsible for repaying the amount owed, even if their divorce agreement states that this debt will belong to one spouse. If credit card debt is allocated to one spouse, and that spouse chooses to file for bankruptcy at some point after getting divorced, the credit card company may seek to collect the remaining balance from the other spouse. To avoid this issue, it is often recommended for spouses to pay off credit card debts before getting divorced whenever possible.

Home mortgages and other secured loans may also need to be addressed during the divorce process. Most of the time, the spouse who maintains ownership of the property secured by these loans will be responsible for repaying the remaining amount owed. This will often make sense for auto loans or loans used to purchase other property, such as home appliances. However, it may be difficult to refinance a mortgage to remove one spouse from the loan, since a lender may be concerned that the other spouse will be unable to make ongoing mortgage payments on their own. If sole ownership of a home by one spouse will not be possible, a couple may need to sell their home during the divorce process, and they may use the proceeds from the sale to find new living arrangements for both spouses.

Finally, a couple may need to address student loans. In most cases, a spouse will be responsible for repaying their own student loans. However, in some situations, one spouse may believe that the other should help repay these loans. These situations may include cases where one spouse pursued an education in order to increase their earnings and provide the primary income for their family or where a couple agreed during their marriage that they would both take on the burden of paying the educational debts for a spouse who earned a lower income than their partner.

Contact Our Joliet Marital Debt Division Attorneys

If you have questions about how debts may be divided during your divorce, The Foray Firm can advise you of your rights and options. We will work with you to negotiate a divorce settlement that will fully address these issues while protecting your financial interests. Contact our Homewood asset division lawyers at 312-702-1293 to set up a confidential consultation.




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