Key Takeaways:
- Washington is a community property state. This affects property and debt division.
- This includes debts you may not be aware of.
- Creditors are not bound by divorce settlement agreements.
- Debt prior to the union belongs solely to the person who incurred it.
- If debts are kept secret and incurred by one party and not for the marital community, the court may consider them a separate debt.
- The most common way to protect yourself in these situations is to refinance loans.
- Once you finalize your divorce, your finances are separate.
It’s an unpleasant fact of life, but many of us have racked up a significant amount of debt. We’ve got student loans, mortgages, car payments, credit card bills, and more places we owe money. We all know finances play a big part in ending a union, but how do courts treat debt in divorce?
The division of property and debt forms a significant part of dissolving a marriage. People focus so much on doling out what they have that they often forget what they owe.
How Does The Court Divide Debt in Divorce?
Washington is a community property state. This means that the government views all assets and debts accrued during the marriage as the equal responsibility of both spouses.
That doesn’t, however, mean courts split everything down the middle in divorce.
The court’s primary goal is to ensure both parties come out of the marriage on a relatively even footing. Beyond that, they want each spouse to maintain a lifestyle similar to what they had during their marriage.
While that may sound like a logical way to approach the situation, it often also include debts you weren’t aware of.
If you have separate credit cards, for instance, and your ex purchases a big-ticket item without your knowledge, you may be obliged to pay back that amount. In a community property state, it doesn’t necessarily matter whose name shows up on the bill; you both share the burden.
Divorce Doesn’t Change Loan Debt
One thing to carefully consider when dividing debt in divorce is any outstanding loans you have.
Divorce doesn’t automatically alter any financial agreements you made with outside parties.
If your name appears on a home or car loan, divorce doesn’t change that. When you and your spouse establish a line of credit, those terms remain in place. Even if the marriage ends.
Creditors are only obliged to honor the conditions as they appear on the initial agreements. And we’ll say this again for those in the back: Divorce doesn’t automatically alter those contracts.
So, even if your ex gets the house in the divorce, if your name still appears on the paperwork, it can impact you. If your former spouse misses a mortgage payment, it negatively reflects on you.
If it gets bad enough, creditors may come after you for payment or take legal action.
Related Reading: Divorce or Bankruptcy: What to File First
Are You Responsible For Your Ex’s Debt?
When it comes to debt and divorce, what builds up during the marriage remains your issue to deal with. Pre-existing liabilities, however, are something else entirely.
Washington State Law says:
“Neither person in a marriage or state registered domestic partnership is liable for the debts or liabilities of the other incurred before marriage or state registered domestic partnership.”
That means you’re not on the hook for your ex’s old financial obligations.
Any student loan debt you had before your marriage isn’t your problem. Neither are those massive credit card bills your spouse ran up before you got together.
Related Reading: What’s The Difference Between Legal Separation and Divorce?
What if Your Ex Ran Up Debt Without Your Knowledge?
Again, because Washington is a community property state, the court presumes that all property and all debts acquired during a marriage belong to both spouses.
However, if debts were kept secret, and incurred entirely or partly by one party and not for the benefit of the marital community, the court may consider it separate debt. Emphasis on the word may. This is often difficult to prove in a definitive manner.
In this case, they may make what they believe to be a “just and equitable” division, or assign it entirely to the responsible party.
It’s important to remember the court ultimately decides how to divide things. It has the authority to determine whether or not an obligation is separate or community property. Regardless of whose name it’s in, they can still award the debt to either party.
Related Reading: Jurisdiction: Where You File For Divorce Matters
Can You Protect Yourself?
The most common way to protect yourself in these situations is to refinance loans.
Divorce agreements often include terms requiring the owner of a specific debt to complete the task by a certain date. This offers one way to shield yourself from future financial misdeeds.
Still, you often have to make sure it actually happens. Even if refinancing was supposed to take place, if it doesn’t, it can still come back to bite you.
Debts that build up after a separation, but before signing the final papers, fall into a bit of a gray area.
In these cases, the court tries to determine whether they’re for necessities. A judge might divide common expenses, such as an electric bill or a utility payment for the family home. But if your soon-to-be-ex puts a trip to Hawaii on the joint credit card, they might view that in a different light.
Related Reading: Rebuild Finances And Protect Your Credit Score After Divorce
Debt Moving Forward
Once you finalize your divorce, your finances become two distinct things. You have separate bank accounts, credit cards, bills, loans, and the whole works.
As with most legal matters, dividing debt in a divorce becomes incredibly complicated. It can go relatively smoothly in shorter marriages or cases without much in the way of shared property. But the more you have to deal with, the more problems usually arise.
It’s important to be aware of your assets in a divorce, and the same goes for debts. Make sure you keep tabs on how much you owe, and where, whether it’s in your name or your spouse’s.
Related Reading: Can You Protect Your Business During a Divorce?