When couples divorce, one of the complicated issues they face is the division of debt. On top of dividing assets, courts must decide how to allocate shared financial obligations. Knowing how this process works can make it easier for individuals to predict how the court may handle their debts.
Alabama follows equitable distribution
Alabama is an equitable distribution state. This means that the court divides marital property in a way that is fair, though not necessarily equal. The court considers various factors when deciding what’s fair for each spouse. The equitable distribution principle applies to both assets and debts gained during the marriage.
What counts as marital debt?
Marital debt generally refers to financial obligations incurred by either spouse during the marriage. This could include mortgages, car loans, credit card debt, and student loans. Debts taken on after the separation or for personal use may not fall into the marital debt category. The court reviews each debt to determine its purpose and the circumstances under which one party incurred it.
Factors courts consider
Several factors influence how the court divides debt between spouses. For example, if one spouse earns significantly more than the other, courts may assign more of the debt to the higher earner. Courts also consider whether the debt was used for family purposes or individual use.
For instance, if one party used the credit card for household expenses, the court may treat it differently than if they used it for personal shopping. Finally, if one spouse alone was responsible for incurring a particular debt, the court might assign that obligation to them.
Unique considerations for secured and unsecured debt
Debts are either secured (backed by collateral) or unsecured (not tied to any specific property). For secured debts, like a mortgage or car loan, the court may assign both the asset and the debt to one spouse. The court often splits unsecured debts, like credit card balances, based on the factors above.
A new financial future
The division of property and assets often takes center stage in divorce proceedings. However, debt allocation is equally important in shaping each spouse’s financial future. Taking time to understand the process allows individuals to better prepare for the financial changes that come with divorce.
