pinterest

As it pertains to divorce law, a liability is any debt that is either separately held or shared within the marital community (i.e., deemed marital debt by the court). For example, this can include debt such as credit card accounts, student loans, gambling debts, or any outstanding bills for goods or services purchased during the marriage. If the parties cannot agree on how to divide their debts, then an Alpharetta court will determine whether each loan is a marital or nonmarital liability for the purpose of asset distribution. If the loan is deemed a marital liability, equitable division doesn’t always require that debts be split equally.

Can a Debt Incurred during Marriage be Considered a Separate Liability?

Debts held in the spouses’ names can be considered separate liabilities. A spouse who holds a loan in only their name, or one taken out for non-marital purposes, or after the couple separates, will keep the obligation to pay off that separate liability by themselves. That separate loan will not be considered marital property to be divided equitably.

If private or business debts were incurred by one spouse without the consent of or without benefitting the marital community, an Alpharetta court may consider these debts as separate liabilities even if they were acquired during the marriage. That means that even though one spouse may have run a joint credit card balance up just before separating from the other, that debt will not necessarily be considered a marital liability.

How is Marital Debt Handled when Dividing Property between Spouses?

Georgia is an equitable distribution state, and all marital liability is subject to division just like marital property. Loans taken out in the name of both spouses are considered marital liabilities. Sometimes, courts will allocate more of the debt to one party if it was incurred in connection with non-marital activities, such as business-related travel that will be reimbursed by an employer or in connection with an extra-marital affair.

Furthermore, a spouse with greater earning capacity and/or separate assets may be awarded a greater proportion of the marital debt. The court will balance the earning capability, separate assets, marital assets, and marital debts to create an equitable outcome and make an award in the final Divorce Decree resolving responsibility for debts and ordering spouses to refinance their loans so the other spouse’s name will be taken off the loan.

Liability for House Payments in Alpharetta

A mortgage is typically the largest debt which married couples have at the time of splitting up. In a situation where the marital home will not be sold in the divorce settlement, responsibility for the mortgage must be accounted for in the property division along with all other liabilities.

Dividing Credit Card Debt

Credit card debt incurred during marriage is usually considered martial debt in Alpharetta. An equitable division of martial debt typically requires the parties to add up all of their debt and divide it according to the proportion determined to be equitable by the court, with each party assuming responsibility of their proportion of the debt. If the court determines that credit card debt is considered non-marital, the person whose name the debt is in shall be responsible for it.

While a divorce decree may assign credit card debt to one spouse or another, this designation does not apply to all of the creditors. If one party signed a contract obligating them on a debt, their creditor will be able to pursue them even if the court ordered their spouse to take care of it. That is because a divorce decree cannot override contractual obligations.

Using Marital Funds to Pay Off Part of a Loan

A loan taken out on behalf of one spouse can be paid down during the marriage using marital funds. This does not necessarily turn the loan into a shared marital debt. In cases where a loan drained a couple’s financial resources and contributed to their break-up instead of benefiting the marital community, the court would likely assign liability to the spouse who took out the loan. Alternatively, the court may order one spouse to shoulder a greater proportion of the debt if they end up with the greater share of separate assets.

Do You Have to Pay Back what Your Former Spouse Contributed?

Georgia case law demonstrates a long-held pattern of balancing assets and liabilities in an equitable way, rather than requiring one spouse actually to reimburse the other for past investments. Usually, divorced spouses end up refinancing the previously joint debt into their own names. If a loan is deemed marital, credit may be given to a party who contributed “separate” or “premarital” property to pay it down during the marriage, but marital funds put toward separate loans do not usually justify an order of reimbursement. The spouse found not to be responsible for the separate loan would simply be relieved of the burden of paying it down in the future.

It is important to consult with a knowledgeable attorney to make sure that stipulations such as these are both fair and very thoroughly laid down so nothing is left to interpretation. Seek legal advice from our team to make sure your final divorce order sufficiently determines liability for asset distribution in Alpharetta.

Recent Blog Posts
Atlanta Divorce Group Earns Distinction As A Law Firm 500 Honoree for 2020
On Saturday, December 5, 2020, the Law Firm 500 Award committee announced the list of 2020 Honorees, ranking Atlanta...
What Will You Carry into 2021? What Will You Leave Behind?
2020 Challenged All My Assumptions We did it — we made it to the last month of 2020! What...
How to Overcome Abuse to Divorce a Narcissist
Initiating a divorce can be difficult. Divorcing an abusive narcissist can feel impossible. Fortunately, there are healthy ways to...
View All Posts