Divorce, What It Means for Property and Debt

When you think about property in a divorce, it's not just a question of what you own (your assets) when a marriage ends.

There's also the unpleasant reality of debts. Just like the courts divide assets, they also divide debts in a divorce settlement. The biggest kinds of debt besides a mortgage are car loans and credit card debt.

Debt generated before marriage is considered separate debt. In addition, some states treat some types of debt (most often credit card debt) as separate debt, depending on which spouse signed the credit card application. Other states consider all debt generated during marriage to be joint debt. Any debt will be divided according to the law of the state where you live, so it's important to understand how your state treats debt in a marriage.

Some Important Exercises and Questions to Consider in a Divorce

1. List your significant assets. Could any of these assets be considered separate? Do you have any assets now that you owned before marriage?

2. Now list your debts. Remember to include things like car loans or mortgages as well as credit card debt. How do you think your debts would be seen by a divorce court? Would any be considered separate? Check the law in your state to see if credit card debt is seen as the responsibility of the couple or the person whose name appears on the account.

3. If you don't own intangible property (such as a business), talk to someone who does, and see how they would put a dollar value on it. Ask about the difference between the financial value and the emotional value of the asset.

Find out how he or she would feel about having a judge put a dollar value on the asset. How would this person feel about having to buy out his or her spouse for the half interest in the business? Do you think this is fair?

4. How can you find out whether the state where you live is a community-property state? Would knowing that change anything about the way you handle your property? (Remember, property can include all sorts of things-from a car to a retirement account.)

5. What kinds of records or documents would a person have to keep in order to show that he or she owned property before getting married? Why could this be important?

6. Here's a good one: The vows a couple says when they get married aren't the legally enforceable terms of the contract defined by the state that makes them a married couple. Try explaining to someone else the difference between marriage vows and a contract. It's the best way to see if you understand the difference yourself!

Divorce can be unpleasant enough without dealing with surprises concerning property and debt, and who owns what or owes what portion. Having these questions answered before you start the divorce process will save you time and money on attorney fees, as well as any hidden surprises once the divorce process actually begins.

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