Living together and sharing financial resources are both common practices for married couples. Unless spouses have a prenuptial contract declaring otherwise, each spouse has a degree of interest in the assets and income of the other.
Two people living together can often enjoy a better standard of living than either could afford on their own, but even with working adults, a family may also end up accruing significant debt. Married couples may have shared credit card accounts. One spouse may have used payday advance services to cover short-term expenses. There could be student loans, vehicle loans and numerous other forms of debt incurred during the marriage.
What happens to marital debt when Minnesota spouses decide to divorce?
Couples must report and divide their debts
Financial transparency is a key component of Minnesota divorce proceedings. Each spouse typically needs to provide the other with an inventory of personal resources and financial obligations. The spouses then either negotiate a property division settlement with one another or ask a judge to apply Minnesota’s equitable distribution statute to their marital estate.
There are many ways to address debts during property division negotiations. Sometimes, the spouse who earns more or who has more separate property may agree to keep more marital debt to balance out other aspects of the household’s finances. Other times, spouses might agree to liquidate some of their resources, such as a percentage of their home equity, to pay off marital debts in full during the divorce proceedings. That way, neither spouse has to worry about marital debts after the divorce.
Spouses might also negotiate arrangements to divide the debt. Each spouse might accept responsibilities for certain accounts. As a general rule, any debts incurred during the marriage with the purpose of supporting the marital family could be subject to division.
Certain debts may remain separate
One spouse may have sole responsibility for certain financial obligations in cases involving financial infidelity or debts accrued to dissipate marital resources. Debts acquired prior to the marriage could also remain the separate property of one spouse.
The amount of debt carried by the spouses and other personal factors, like their plans for the next five years, can influence how spouses address financial responsibilities in a Minnesota divorce. If they can’t reach an agreement with one another about how to fairly divide their debts, then they may need to go to court and ask the judge to rule on the matter.
Ultimately, understanding what debts might be subject to division in a Minnesota divorce can help people more effectively negotiate with their spouses or prepare for litigation.