What Happens to Debt During Divorce in Utah?
Two types of debt are usually discussed during divorce: marital debt and individual debt. Couples with a lot of debt may want to explore all of their debt relief options, including bankruptcy.
August 07, 2011 /24-7PressRelease/ -- Divorce brings with it many concerns and questions: How will custody of the kids be determined? Who will get the dog? Who gets the house? How will a single income affect the household?
However, it is not only the household goods, children and pets that must be divided. The marital debt also must be split and paid. And, while dividing marital debt will not bring with it the joy, affection and warm sentiment that family members, pets or even the some personal property may offer, the way family debt is divided in a divorce can have a major impact on a person's post-marriage life. A Salt Lake City divorce attorney will work to protect assets of their client while minimizing their exposure to debt.
Dividing Debt
Two types of debt are usually discussed during divorce: marital debt and individual debt.
Individual debt is debt incurred by one spouse before marriage, during the marriage but not as a family expense, or after the marriage ends. Under Utah law, this type of debt is and remains the responsibility of the spouse who incurred it. Specifically, the law states that "neither spouse is personally liable for the separate debts, obligations, or liabilities of the other."
Marital debt -- also known as joint debt -- is debt incurred during the marriage as a family expense. Upon divorce, this type of debt is divided between the spouses, just like marital assets are. Marital debt includes joint credit cards and purchases that both spouses sign for, such as houses and cars. Also included in marital debt are debts that only one spouse incurs, as long as the debt is a family expense. Utah statute defines family expenses as "expenses of the family and the education of the children." So, even if only one spouse signs the contract for the debt, both spouses may be held liable for paying it.
In Utah, marital debt is equitably divided. This means that marital debts are not necessarily split evenly between the spouses. For example, a spouse with greater means may be assigned more of the debt during the divorce because he or she has a greater ability to pay those debts. Or, a spouse may choose to take more of the debt in order to receive a larger portion of the martial assets.
One issue with marital debt is that once the divorce decree assigns the debt, that decree only applies to the spouses and does not alter contracts between the spouses and their creditors. Creditors may be made aware of the allocations of debt during the divorce; however, if one spouse fails to meet his or her debt obligations, creditors can go after the other spouse to collect the debts.
By understanding how debt can affect former spouses post-divorce, couples can make decisions about their debt so they are in the best position possible when they begin the divorce process. Couples with a lot of debt may want to explore all of their debt relief options, including bankruptcy, prior to finalizing their divorces.
Bankruptcy Before or After Divorce?
For couples with a lot of debt, filing for bankruptcy could alleviate some of the financial concerns (such as who pays which debt) that arise during divorce. A few bankruptcy options exist for divorcing couples. A credit card debt lawyer will be able to evaluate a couple's financial situation and present them with options for dealing with their debt.
First, a couple could choose to complete the divorce process prior to filing for bankruptcy. After the divorce, both couples then would file for bankruptcy individually. This approach, however, could lead to inequity in how the marital property is held after the divorce. Utah is an equitable distribution state, so one spouse could end up receiving more of the marital property in exchange for taking on a greater debt burden. If this spouse is then able to file for bankruptcy relief and discharge some of the debt in individual bankruptcy, he or she may be able to acquire a greater share of the marital assets without actually paying all of the assigned debt. Further, any debt that could be applied to the other spouse will not be discharged; meaning that the other spouse could still be on the hook for paying the debt.
Another option is for the couple to file for bankruptcy jointly before filing for divorce. Filing jointly prior to divorce helps ensure that any debt that is discharged in bankruptcy is discharged for both spouses, allowing them both to enjoy the benefits of bankruptcy. An added benefit of filing jointly is that the filing and other legal fees are paid jointly, saving the spouses money. When filing individually, each spouse pays separate filing and legal fees.
If you are considering divorce and you and your spouse have a lot of debt, you may want to also consider all of your debt relief options, including bankruptcy. Bankruptcy relief may allow you to start your new life free from debt. Speak with an experienced attorney about your debt situation to get informed and review all of your options.
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