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Michigan Family Law Blog

Wednesday, June 26, 2019

Handling Debt Division in a Divorce

How is debt handled in a divorce?

If you’re considering getting divorced in North Oakland, Michigan, you might have an idea about the issues you need to work out with your soon-to-be ex-spouse, but there may be unexpected issues, too.

Even if you don’t have the added emotional burden of working out child custody, visitation, and support for your minor children, virtually all divorcing couples have to address two questions: whether one spouse will pay the other alimony and how will the couple’s stuff get divvied up?

It’s best if couples can agree on who gets what, because if they can’t agree then a judge will decide. Dividing marital property in Michigan is done under the principle of equitable distribution which means the court will attempt to divide the couple’s property reasonably fairly. While this may not necessarily mean 50-50, the split is not generally outside of 60/40 unless exceptional circumstances exist. 

In general, marital property are assets acquired by the couple during their marriage, including income and retirement accounts. Separate property is generally property acquired by the husband or the wife before they got married and/or inheritances received by one spouse before or during the marriage. 

While couples may have an idea on how to divide tangible property like cars, furniture, and even the pets, they often don’t realize that in addition to splitting up their things, they also need to divide up their debt. Marital debt--including credit card debt--is also often divided on an equitable distribution basis. And debt acquired individually before the marriage generally remains that partner’s responsibility. 

It’s important to have a skilled divorce lawyer to avoid problems, especially with jointly-held credit card debt. State laws differ but in general, a credit card company maintains the right to pursue either spouse for the unpaid balance on a joint account-- even if the divorce decree states one partner is responsible for it. That’s because the credit card company is not a party to the divorce action and the credit card company’s rights under its contractual agreement with the couple it jointly extended credit to – – including the right to sue either of them – – cannot be taken away by the divorce judge.

In such an instance, the non-responsible spouse under the divorce agreement, if sued or pursued, may need to seek indemnification by the spouse responsible for paying that debt. Opening individual credit card accounts and transferring balances, when possible, is often a better alternative for divorcing couples if agreeable to the credit card companies. 

If you are considering getting divorced, have been served with divorce papers, or have any other questions regarding a family law matter, Cameron C. Goulding Family Law and Mediation, P.L.C. can help. Contact us today to schedule a consultation. 

From our offices in Rochester, Michigan, we are solely devoted to the practice of family law and help families throughout Oakland, Macomb, Genesee, Livingston, Lapeer and Wayne counties navigate their way through the challenges of divorce


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