For Colorado spouses going through a divorce, property division can be a complex and stressful process. But the equitable division of property is not just about dividing assets; it’s also about dividing debts. When joint accounts are involved the process can be challenging. But it can be done, and done fairly, if some sensible steps are followed.
Once an individual knows they are headed for divorce, it’s important to sort out which debts belong to which partner. With joint accounts, both partners are legally liable for paying off the debt. In a divorce proceeding the court can order one party to be responsible for a joint debt. But the creditors are not bound by the divorce decree, and can go after the other spouse if the party ordered to pay fails to do so.
To avoid this issue, it’s a good idea to eliminate all joint debt as early as possible in the divorce process. The parties can negotiate an agreement to transfer the outstanding balance to a new account in only one spouse’s name. The parties can then agree that the spouse who assumes the debt receives a greater share of the marital property in return.
If at all possible, the parties should cooperate to settle as many debts as possible before the divorce is finalized. If a large asset like a house is sold in connection with the divorce, the proceeds can be used to pay off debt.
Debt division can make a complex property division even more complicated. Working with an experienced divorce lawyer, and working in good faith with the other party to reach a fair resolution, can make post-divorce life a lot less stressful.
Source: Foxbusiness.com, “Debt and Divorce: 5 Steps to Make a Clean Credit Split,” Dawn Papandrea, July 14, 2014
