No Matter What You Are Feeling, Ruppert Law Firm Can Guide You

Do you have to split debts when dividing property in a divorce?

On Behalf of | Apr 8, 2024 | Property Division

Property division is a major part of many Pennsylvania divorces. Assets often take the spotlight in these discussions.

However, debts also play a significant role. For example, they can influence the division of assets.

Considerations for debt division

In Pennsylvania, debts acquired during the marriage are subject to equitable distribution, just like assets. This typically leads to the fair, although not necessarily equal, division of debts incurred by either spouse during the marriage.

The court considers factors such as each spouse’s earning capacity, financial contributions during the marriage and the duration of the marriage. For instance, if one spouse took on significant debt through reckless spending or irresponsible financial behavior, the court may allocate a larger share of the debt to that spouse.

Before dividing debts, identify which ones are marital debts and which are separate. Marital debts are those incurred during the marriage for the benefit of the marital estate. Examples include mortgages, car loans, credit card debt and medical bills accrued during the marriage. In Pennsylvania, the average credit card balance is $6,111.

Offsetting debts against assets

One way debt division affects asset distribution is through the process of offsetting. This involves balancing out the value of assets against the amount of debt assigned to each spouse. For example, if one spouse receives a higher share of marital assets, they may also have a greater portion of the marital debts to offset this imbalance.

Complex asset distribution

High levels of debt may limit the available assets for distribution or require creative solutions. For example, if the marital debt exceeds the value of the marital assets, the court may need to consider alternative methods of division, such as ordering the sale of certain assets to pay off debts.

Negotiation and agreement

In many cases, couples can negotiate a debt division arrangement outside of court through mediation or direct discussion. This allows them to have more control over the outcome and tailor the agreement to their specific circumstances.

The allocation of debts may influence each party’s bargaining power when negotiating for specific assets. For instance, a spouse who is willing to take on a larger portion of the marital debt may have a stronger position when requesting ownership of certain assets, such as the family home or a retirement account.

By understanding the factors that influence debt division, couples can work toward a fair and amicable resolution.