If you are considering divorce, you need to prepare for dividing marital debt. Since most couples owe a good deal of money to creditors, a real concern becomes how to pay off debts and who pays what.
Debt acquired by either spouse during the marriage is usually considered “marital debt.” Florida courts observe equitable distribution of marital assets and debt. This rule seeks a fair, but not always equal, division of both assets and debt.
Marital debt is used in the accounting of the marital estate and divided among the divorcing spouses. Marital debt typically includes:
- Credit card debt
- Home equity lines of credit
- Vehicle loans
- Business debt
Courts can assign marital debts to either spouse upon divorce. For example, if you and your spouse take out a car loan while you are married, you are both legally responsible for paying that loan after divorce. However, the court may ultimately assign the debt to only one spouse in the divorce order.
The Importance of Negotiating a Settlement Agreement Out of Court
As you go through the divorce process in Orlando, you will enter into divorce mediation. Divorce mediation is the formal way for you to negotiate your differences – including the division of debt and property – on your own terms. The agreement you reach is called the Marital Settlement Agreement and becomes part of your final judgment.
If you cannot come to an agreement at mediation, the Florida divorce court will divide assets and debts for you and impose the court’s own mandate on how you will live from the final judgment forward.
With the aid of an experienced and resourceful divorce attorney, it is far more likely that you reach a fair settlement where you have greater control of your destiny and avoid forcing a court to direct to which spouse your property and debt will go.
Make it your goal to be knowledgeable about dividing marital debt.
The court considers many factors when dividing debt in divorce and will use assets and debts to strike a balance for both spouses. For example, the court may award one spouse more marital assets, but the court may also assign to that same spouse more of the marital debt in order to be fair.
In determining how to best divide marital assets and debts, the court will consider what each spouse brought into the marriage. In addition, you and your spouse may have signed a prenuptial or postnuptial agreement, which will usually dictate how a court will split marital assets and debts. The judge examines the following aspects of your marriage, and so must you as you contemplate your marital debt:
- Length of the marriage
- Age and health of each spouse
- Income of each spouse
- Employability / earning potential of each spouse
- Amount of non-marital assets
- Prenuptial or postnuptial agreements regarding debt
- Advancement of the other spouse’s income during the marriage
- Standard of living during the marriage
- Tax implications
Complex Debt in Orlando Divorce
Unfortunately, as divorce attorneys we see a tendency in divorcing spouses to argue over how to divide debt. Because husbands and wives are often financially dependent on each other during marriage, complex financial obligations can result when a couple decides to divorce.
Debt adds complexity to a divorce. Therefore, it is especially important to consult with an experienced attorney when determining what to do with complex divorce debt.
A very real and common example of complex divorce debt occurs when a marital home is “underwater.” This means that the amount of money a couple owes on the house is greater than the value of the house itself. In this case, a husband and wife are not able to divide equity in their house, but instead find themselves in a battle over who is going to pay the debt or how to divide the debt on the home.
Protect your Rights to Fair Debt Division
As Orlando divorce attorneys, it is our job to create a clear picture of our clients’ finances in order to ensure that they can properly deal with assets and debts.
At Kramer Law, we help our clients “think like the family court judge” in negotiating a settlement agreement that divides marital debt in a fair and proper manner that the court will accept.
Moreover, our attorneys take several extra steps in order to find resourceful and creative solutions that truly solve difficult financial problems. We also help clients “think like a financial planner” to ensure that they protect both their current goals and future financial health:
- If the court awards you the house and the mortgage, can you afford it?
- Are you flexible or ready to make financial trade-offs with your debt burden?
- Do you have a plan for “what ifs” – what if you and your spouse opt to sell the house after the divorce and split the profit, but a year later it is still for sale?
- Do you have a plan for handling debt in your new, “normal” life once the divorce is final?
Contact Orlando Divorce Lawyers Who Can Help
Certainly the best plan is to eliminate as much of your debt as possible before or during divorce. But that is easier said than done.
Do not hesitate to consult a divorce attorney at Kramer Law in Orlando for a confidential discussion regarding debt and asset division after divorce and to view the true financial picture of your divorce. We are here to protect you, your family, your home, and your business both during divorce and long after. Call 855-Kramer-Now (855-572-6376).