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Individual and Marital Debt in a Divorce

Property division after a divorce in North Carolina can be a divisive issue. In a property division dispute, one spouse may be seeking more money or wanting to keep the family home. Debt in a divorce can be just as hotly contested, with spouses arguing over who should bear more responsibility in debts and paying back loans.

Individual debt and marital debt are treated similarly to individual and marital property in a divorce. Generally, marital debt is divided equally and individual debt remains attributed to the individual spouse. However, the court can shift more debt to one spouse, depending on the circumstances. Talk to an experienced North Carolina family law attorney to make sure you are not left paying for someone else's debts after a separation.

Source of Individual and Marital Debt in North Carolina

According to one survey, the average household with debt has over $135,000 in total debt. Excluding mortgages, the average person has about $38,000 in debt. This type of debt is generally accumulated over a person's lifetime, including before, during, and after marriage. The primary sources of debt in the U.S. include credit cards, mortgages, car loans, and student loans. However, there can be other major sources of debt, including medical care.

Treatment of debt generally relates to when the debt was incurred. Taking out student loans before getting married generally means the individual is responsible for paying back the loans. Taking out a mortgage after a couple is married generally means both are responsible for repayment of the loan. However, it is up to the court to determine how to divide debt in a divorce.

Equitable Distribution of Debt in North Carolina

North Carolina is an “equitable distribution” state. Under equitable distribution, marital and shared debt and property are generally divided in a way that would be equitable. This is not necessarily a 50-50 split and can be modified in a way that will be fair to both parties, in the eyes of the court. Factors in determining equitable distribution can include:

  • The assets and liabilities of each party,
  • Any obligation for support from a prior marriage,
  • The duration of the marriage,
  • Direct or indirect contributions made by one spouse to help the career potential of another spouse, and
  • Which spouse accrued the debt and for what purpose.

For example, if one spouse took out a joint credit card without the other spouse's knowledge, the court may determine that all the debt from that credit card will be the responsibility of the spouse who used the card and not the innocent spouse.

Alternatively, if a spouse used a personal credit card to purchase clothing for the couple's children, pay for property repairs, or pay the vet bills for the family cat, that debt may be divided between both spouses.

Student Loan Debt in a Divorce

Student loan debt is a significant source of debt for many young couples. Student loan debt after a divorce can also be complicated based on when the loans were taken and the contributions of the other spouse. Generally, if the student loans were taken out before the couple was married, the loans will be attributed to the individual on the loans.

However, if one spouse was going to school when the couple was married, the court may look at other factors to divide the debt. If the other spouse was working, contributing to the household, or forgoing their own educational goals to support the career potential of the spouse in school, the court will generally consider those contributions in dividing the property and debt. The spouse taking the student loans may be given all or a greater share of the debt and the contributing spouse may get less of the debt and/or more property in the divorce.

Debt Carried After Divorce

It is generally best for individuals to divide debt in a divorce and not carry shared debt. Sharing debt after a divorce could put your assets at risk. For example, if a couple continues to share a mortgage after a divorce, if one spouse later declares bankruptcy, creditors could go after the house for the full amount of the debt. Make sure you understand how shared debt obligations will affect you after a divorce.

Legal Representation in North Carolina Divorce  

The attorneys at Caulder & Valentine provide experienced family law services to individuals facing a separation or divorce. In a stressful time, we are here to protect your assets, get your rightful property, and avoid the burden of another person's debt in a North Carolina divorce. Contact us in Shelby today for a consultation.

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