If you are contemplating a divorce or going through a divorce, it can help to understand the laws and rules for dividing marital debt. Just like assets, debts are divided into marital debts and non-marital debts. However, a judge does not use this distinction as the only factor when dividing marital debt. Below are seven additional things our Michigan property division lawyers believe you need to know about the division of debt during a divorce.
Dividing a Couple's Debt During a Michigan Divorce
1. Fair vs. Equal Division of Debt
Under Michigan divorce law, the judge is required to divide assets and debts “fairly.” However, fairly does not necessarily mean equal. If one spouse works and the other spouse stayed at home to take care of the child, dividing the marital debts in half would not necessarily be “fair” to the spouse who is unemployed and may not have the skills, experience, or education to obtain a job sufficient to pay living expenses and one-half of the marital debts.
2. Short Marriages May Be Treated Differently
In some cases, a judge may try to return each spouse to the financial position he or she was in at the time of the marriage when the parties have been married for a short time (under five years). A judge may try to divide the debts so that each party has roughly the same amount of debt or the same percentage of debt that the spouse brought into the marriage.
3. Non-Marital Debt
In most cases, the debts that a spouse had at the time of the marriage remain the responsibility of that spouse. However, it can become complicated if the debt was increased to purchase a marital asset or the spouse with the debt contributed substantially to pay down the other spouse's non-marital debt during the marriage at the expense of his or her debt.
4. Creditors Are Not Bound by Debt Division Orders or Agreements
Even though a judge can order a spouse to pay a certain debt, the creditor is not bound by this order. If the other spouse is a co-signer or if the debt is solely in the name of the other spouse, the creditor can pursue all legal remedies to collect the debt. The only recourse the spouse who was not ordered to pay the debt has against the paying spouse is to file a motion with the court for contempt of court.
5. Marital Debts Created by Misconduct
If a spouse created marital debts because of misconduct (i.e. gambling, defending criminal charges, paying for a paramour, etc.), the court might assign a greater portion of debt to the spouse who created the debt because of misconduct.
6. Marital Debt Can Be in One Name Only
Marital debt is not defined as “joint” debt. Your spouse could have a credit card solely in his or her name, but the judge could order that you are responsible for a specific amount or percentage of the debt.
7. Debt Division Could Be Tied to Asset Division
The judge may decide that one spouse should be responsible for a larger portion of the marital debt because he or she is receiving a greater portion of the marital property. This situation often arises when a spouse assumes a mortgage because he or she is being awarded the marital home.