The process of divorcing essentially requires that spouses separate their lives to begin living independently from each other. Property division can be quite challenging, as spouses often accrue quite a bit of property and also debts throughout their marriages.
The law in Indiana requires an equitable or fair distribution of both resources and financial obligations as part of a divorce. Debts ranging from credit cards to student loans that people took on during the marriage could influence other elements of the property division process.
How can spouses properly address their debts when they divorce?
Validating marital debts and identifying separate debts
One of the first steps toward a fair property division outcome is the careful analysis of personal resources and financial obligations. Some assets and debts are marital property. People acquired them during the marriage, and they must therefore divide them during the divorce.
Other resources or financial obligations could be separate property. Assets owned and debts owned before marriage are often the separate property of one spouse. Additionally, debts accrued without a spouse’s awareness during marriage or as part of an extramarital affair might be the separate obligation of one spouse and not part of the marital estate. Determining which debts are subject to division is a key step in any divorce.
Paying off or dividing the debt
Spouses frequently take out lines of credit together. They generally need to close and pay off those accounts when they divorce. In some cases, each spouse might commit to paying a certain portion of the debt. Other times, each spouse might take personal responsibility for certain accounts. It is also common for people to use marital resources, including home equity, as a way of paying off debts so that they don’t start off their new lives with a massive financial burden.
If spouses can’t reach an agreement with one another about the best way to handle their debts in an Indiana divorce, then they need to wait for a judge to rule on the matter. Judges can include marital debts in property division orders and may use them to balance out uneven asset distribution terms.
Marital debts can be a major source of stress during an Indiana divorce, as the failure of either spouse to fulfill their obligations after the divorce could lead to financial setbacks for the other spouse regardless of the property division order. Proposing realistic solutions can help more rapidly resolve property division matters in an upcoming divorce.