marital debt

Divorce is a complex process, and untangling finances can be one of the most challenging aspects. Dividing marital assets is well-known, but what about marital debt? In Colorado, like many other states, debts acquired during the marriage are treated similarly to assets and are subject to equitable distribution during divorce. 

As the average U.S. household debt was $104,215 per household in late 2023, according to an analysis conducted by The Motley Fool Ascent, it is a large factor for divorcing couples to be concerned with who will receive what portion of the accumulated debt. 

Marital Debt vs. Separate Debt

The first step is understanding the difference between marital debt and separate debt.

  • Marital Debt: This refers to any debt incurred during the marriage, regardless of whose name it’s in. This includes car loans, mortgages, credit card debt, medical bills, and personal loans taken out during the marriage. Even if only one spouse’s name is on the loan, if the funds were used for marital purposes, it’s considered marital debt.
  • Separate Debt: This refers to debt acquired before the marriage or debt incurred by one spouse for their own benefit during the marriage. Examples include student loans taken out before the marriage, credit card debt used solely for one spouse’s hobbies, or a car loan for a vehicle titled solely in one spouse’s name and not used for family purposes.

It’s important to note that commingling separate funds with marital funds can blur the lines. If, for instance, a spouse with pre-marital student loan debt uses marital funds to make payments on that debt, it can become partially marital debt.

Equitable Distribution of Marital Debt

A divorce lawyer in Boulder, Colorado explained that the state follows equitable distribution for dividing marital property and debt. This means the court will divide everything fairly, not necessarily equally. Several factors are considered when determining an equitable division of marital debt:

  • Income and Earning Capacity: A spouse with a higher income or greater earning potential may be responsible for a larger portion of the debt, even if it was originally incurred jointly.
  • Asset Distribution: The overall value of marital assets also plays a role. If one spouse receives a larger share of assets, they may be allocated a larger portion of the debt to balance things out.
  • Debt Responsibility: The court will consider who was primarily responsible for accumulating the debt. If one spouse used a credit card for excessive personal spending, they may be held responsible for a greater portion of that debt.

There is no set formula for equitable distribution. The judge will weigh all the factors in your specific case to arrive at a fair decision.

Special Considerations

There are a couple of additional situations to consider:

  • Debts in One Spouse’s Name: Even if a debt is solely in one spouse’s name, the other spouse can still be held liable if the funds were used for marital purposes. This is why it’s crucial to track how marital funds are spent, especially on joint credit cards.
  • Debts Exceeding Marital Assets: In some cases, the total marital debt might exceed the total value of marital assets. In this situation, the court will typically order the couple to sell off assets to pay down debt as much as possible. The remaining debt might be divided equitably, but it’s important to consult with an attorney to understand the implications of such a situation.

Seeking Further Guidance

Divorce is a complex financial undertaking, and debt division can be a significant factor. While this article provides a general overview of how Colorado handles marital debt, it’s crucial to consult with a Colorado divorce attorney for specific guidance on your situation. An attorney can help you understand your rights

By Elle

Leave a Reply

Your email address will not be published. Required fields are marked *