Debt in Divorce

Divorcing spouses have to not only split their assets, they must also split the debt they have run up together during their marriage. Illinois has rules for assigning responsibility for debts between divorcing spouses, and it’s important to know what your rights are and handle debts correctly so they don’t continue to haunt you even after your divorce is finalized.

The courts decide how to divide marital debts just as they do with marital assets. Since Illinois is an equitable distribution state, debt is not necessarily split 50/50. Instead, courts will split debts in a manner considered to be fair and equitable after considering factors such as who is most responsible for the debt, the needs of the spouses, the length of the marriage, and spousal support and custody awards. In some situations, one spouse may wind up with more debt and receive other marital assets to make the financial picture more equitable.

Unfortunately, just because debt is assigned to your ex-spouse, it doesn’t mean that you will never be responsible. In Illinois, creditors are not required by law to follow the judge’s orders, so should your ex stop making payments on joint debt, the creditors can try to collect from you. If your debt was held jointly, you may wind up responsible for the debt plus interest and penalties. Even if your divorce agreement has provisions to force your ex to pay, going to court to enforce them is expensive.

The process is complicated, so it pays to enlist the help of an experienced divorce attorney. The experienced and compassionate Illinois family-law attorneys at Wolfe & Stec, Ltd. understand that divorce is difficult enough without having to worry about debts, especially those run up by your ex-spouse. We can provide professional guidance to examine your situation and provide specific strategies to protect you and your children. We offer a free consultation to discuss ways to make sure your debt ends when your marriage does.

Marital or Non-marital debt

In Illinois, debts are classified as “marital” or “separate, or non-marital.” Marital debt includes most debts incurred during the marriage and before the date of separation — regardless of which spouse’s name is on the debt, and these are shared debts that the courts will divide. Debt that either spouse incurred before the marriage is considered non-marital and remains their own personal responsibility.

Type of Debt

In general, if you and your spouse have co-signed for debt during your marriage, the debt is the joint responsibility of both. Debt is most often incurred from loans, such as mortgage and vehicle loans, joint accounts, and credit cards. Credit cards and loans that were opened before marriage and are in only one spouse’s name are personal debt; those that were opened by the couple are marital debt.

The courts may balance out debt through distribution of assets. If one spouse receives a particular asset, such as a car, they usually also receive the debt associated with that asset, such as the car payment.

Credit card debt can become particularly complicated. If either spouse has a credit card when coming into the marriage, the balance on the card would be considered a separate debt. If one of you is just an additional cardholder on the spouse’s credit card, the debt will generally belong to the main cardholder. Purchases made on a credit card may be examined to see if they related to the marriage. If the cardholder spouse benefitted from the purchase alone, the debt would probably be classified as separate, but if both spouses benefited from the purchase, the debt would be considered as marital. If the card is a joint account, both spouses are still responsible for the debt, and if one fails to make payments, creditors will pursue the other.

By law, the cardholder owes the debt to the credit card company even if the other spouse is assigned the debt in the divorce. This could affect the cardholder’s credit rating if the other spouse fails to make required payments.

How To Protect Yourself

It’s always best if you and your spouse can work together to eliminate debt before your divorce, but it is not always possible to do so. Taking the following steps can help:

Get a Copy of Your Credit Report. Make sure your credit status is good and that your spouse hasn’t run up debt and loans without your knowledge. Consider signing up for a credit fraud protection service to alert you to unknown activity.
Leave the marriage without any jointly-held debt. Try to pay marital debt before the divorce so that debts are not as big an issue in divorce determinations. If you can, work with your spouse to set a date after which agreed-upon portions of joint debt are to be transferred onto new cards in each person’s name and joint cards are to be canceled. Either pay off the joint cards together or divide the debt already on your joint cards between you and put the debt on the new cards. If you cannot agree, make a list of all joint credit cards and accounts and cancel them before the divorce to prevent your spouse from racking up more debt.
File documents with the courts stating the debt for both parties. Recording how much debt was held on the date the relationship ended helps prevent your spouse from running up debt that you might wind up responsible for later.
Keep good records of your own charges after your separation date, since that is when debt on credit cards becomes the responsibility of the spouse who made the purchases. Also, you want to be able to prove what is yours.
If your debt is overwhelming, you might be able to use joint savings or take a home equity line of credit in your home to help, or even consider filing for bankruptcy. It’s best to file for bankruptcy together to make sure that neither party gets stuck with the debt and that you discharge your debts before you start separate lives.

Debt in Divorce? Get Help Now – Free Consultation

Every divorce is unique, as financial situations, personal property and circumstances differ, and children may be involved. Some couples can work out their debt differences amiably; others fight a bitter war to the end and wind up having a difficult, expensive, and drawn-out contested courtroom proceeding.

Since divorce is so complex and emotionally sensitive, it is most important to have an experienced divorce attorney on your side. The skilled Illinois family-law attorneys at Wolfe & Stec, Ltd. have helped countless families dealing with divorce. We will fight to protect your spousal rights and assets and guide you through each step of the divorce and post-divorce period.

For a free initial consultation with an experienced and compassionate DuPage County divorce lawyer, call or contact us online.

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