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What happens with debt in a divorce?

On Behalf of | Sep 27, 2021 | Divorce & Legal Separation |

Colorado courts apply the doctrine of equitable distribution when deciding what property each spouse will take after a divorce. The goal of this approach to division is to create an outcome that is fair and equitable to both parties.

Judges take the same approach to dividing debt as dividing assets. Here are some important facets of debt and divorce.

Identifying marital debt

Courts have the authority to divide only marital debt and no outstanding financial obligations that people take on separately. For the most part, obligations that people acquire during the course of a marriage and create a benefit for most spouses tend to fall in the category of marital debt.

Interpreting issues of fact

There may be disagreement about what debt is subject to distribution. The fact that a debt is in only one spouse’s name does not necessarily mean that it is his or her responsibility. However, failing to disclose a debt to a spouse may indicate that it is separate from other marital debts.

Determining what is equitable

Courts may consider many different factors about marriages in their analysis of how to divide debt equitably. Relevant qualities may include its length, each spouses’ financial contribution to marital assets, and each spouse’s respective earning capacity. Courts may also evaluate circumstances regarding specific debts such as whether they benefited the marriage or merely served individual spouses’ interests.

Ultimately, it may be advisable for divorcing couples to attempt to reach a reasonably fair settlement. An expedient resolution can help people keep their financial goals on track.