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Debt and Asset Division in Divorce


During divorce, either the couple will negotiate or the divorce court will assign debt and asset division.

Debt Division

In most states, the law gives the courts the right to divide joint debts between the couple. The parties can enter a written agreement providing for the responsibility of the debts, but if the parties cannot agree, the court will divide the marital debt on an equitable basis.

Even if the court assigns one spouse responsibility for a debt, it may be possible for creditors to chase the other spouse anyway. While the non-debtor spouse may have to pay the debt if the debtor spouse doesn't pay the debt, it is possible to file a contempt of action to be reimbursed for the cost of the debt payments and divorce attorney's fees.

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Property Division

Property distribution is generally based on community property or equitable distribution laws, depending on divorce laws in your state.

In community property laws, the divorce court considers any property acquired by either spouse during the marriage and divides it equally, regardless of financial need, ability to earn or fault in the divorce. Equitable distribution laws are more common and typically consider the length of the marriage, income or property brought to the marriage by each party and other factors to come to fair decision on property division.

During property distribution, the divorce court may consider the division of retirement accounts. A local divorce attorney can further explain whether your retirement accounts may be considered in the property division.

Asset Protection

Asset protection during divorce can happen in one of two ways: premarital asset protection or postmarital asset protection.

Premarital asset protection can be in the form of a prenuptial agreement - also known as a premarital or ante-nuptial agreement. A prenuptial agreement is a contract between a couple before marriage that outlines property distribution, alimony and other monetary issues in a divorce.

Prenuptial agreements do not control issues like child custody, child visitation, or child support.

Most states will generally uphold prenuptial agreements if they are entered into voluntarily by both parties and aren't unfair or hiding any information about assets. It is also important that both parties have separate legal representation when being advised about a prenuptial agreement because one spouse may be able to get out of the agreement by citing conflict interest or coercion by the shared divorce attorney.

Postmarital asset protection is in the form of a postnuptial agreement. Married couples may choose to enter into a written agreement if the financial circumstances of the relationship change drastically. Although most states accept postnuptal agreements, there aren't many divorce laws regarding what makes the contract valid in divorce court. A local divorce lawyer can discuss things you should and shouldn't include so your postnuptial agreement will be accepted by the court.

Learn about how to protect your property and assets during the divorce process by speaking with a local divorce lawyer. Fill out our divorce case review form or call 877-349-1310 to connect with a local divorce attorney for advice about handling your finances and divorce.

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The above summary of debt and assets is by no means all-inclusive and is not legal advice. For the latest information and advice on debt and asset division, speak to a divorce attorney in your area.