In most divorces, one of the issues that spouses must resolve is the division of the marital estate. While many people focus on the division of assets, such as real estate, vehicles, business interests, or stocks and retirement accounts, property division in divorce can also cover debts held by the spouses. Spouses may be surprised when the court in a divorce trial orders them to pay some or all of debts they believe to belong to their ex.
If you are considering or are in the middle of a divorce, you should understand how and why you may be required to take on your soon-to-be ex’s debts.
Distribution of Marital Assets and Liabilities in Divorce
Under North Carolina’s divorce laws, the marital estate must be equitably divided between the spouses. The marital estate includes assets like the marital home, the spouses’ cars, and retirement or brokerage accounts. But it also includes liabilities that the law considers the responsibility of both spouses. As a result, courts can divide marital liabilities between both spouses, or the court may assign a debt to one spouse to offset other assets that they received in property division.
Property division is not meant to divide assets and liabilities equally between spouses. Instead, courts are instructed to achieve a division that may be considered generally fair, or equitable. Therefore, courts may choose to assign a specific asset to one spouse in lieu of ordering the asset sold and the proceeds divided between the parties. However, to even that out, the court may then assign certain debts to the spouse that received the asset.
Marital vs. Non-Marital Assets & Liabilities
In property division, the court must also designate assets and liabilities held by the spouses as marital or non-marital. Martial assets and liabilities are subject to property division in divorce, while non-marital assets and debts generally are not.
However, under certain circumstances, a court may determine that a non-marital asset or debt has been converted into a marital one. This typically occurs when a non-marital asset or liability is mixed/combined/commingled with marital assets or liabilities.
With respect to liabilities, debts that were incurred by a spouse prior to the marriage are typically considered non-marital in nature. Liabilities accrued in the name of only one of the spouses during the marriage might be considered non-marital unless that liability or debt was incurred for the benefit of the household or family. For example, if one spouse has a credit card solely in their name but used that credit card to buy groceries for the household during the marriage, the court may consider any balance on that credit card a marital liability.
Why Might You Be Ordered to Pay Your Ex’s Debts?
Marital debts may be divided between spouses or assigned to a spouse, regardless of which spouse’s name is legally attached to the account or contract. Even if you think that a debt account “belongs” to your ex, the court may assign some or all the balance of that debt or liability to you in property division. Circumstances under which you may be legally required or ordered by a court to pay your “ex’s debts” include:
- Your name is attached to the account, or you executed a guaranty or other promise to pay the account. If that debt account is assigned to your spouse in property division, you should ensure that your name or obligation to pay is taken off the account.
- A debt was incurred by your ex to support your household or the family.
- Medical debts were incurred for emergency or necessary medical treatment.
Conversely, courts may not hold you liable for debts incurred by your ex, even as part of an account held in both of your names. For example, courts typically will not hold you liable for debts incurred by your ex in furtherance of an extramarital affair.
How to Avoid Being Ordered to Pay Your Ex’s Debts
- If you are assigned a debt account in property division prior to the divorce, have the account put solely in your name so that you can control adding to the balance and ensure that payments are made.
- Consider including a provision in your divorce settlement or judgment that requires all debt accounts to be placed on automatic payments.
- Spouses should try to pay off and close all joint accounts after separating and prior to divorce.
Contact Marshall & Taylor PLLC for Expert Legal Guidance During the Divorce Process
If you have questions about the property division process in divorce and how your and your ex’s debts may be divided, call the Raleigh divorce lawyers of Marshall & Taylor PLLC at (919) 833-1040 or contact us on our website for a confidential consultation to discuss your legal rights and options.