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Who is Responsible for
Debt?
Property that is acquired during a marriage by one
or both spouses, and owned on the date of a formal
separation, may be defined as marital property. If a
divorce occurs, this property is subject to the
equitable distribution law of North Carolina.
(Excluded from the definition are gifts and
inheritances, received by one spouse only, from
third parties.)
Although “property”
is generally thought of in terms of assets, it also
includes all debts acquired during the marriage, and
both parties are responsible for it. Equitable
distribution law presumes that an equal (50/50)
division of the marital property is fair and
equitable. In North Carolina, most judges favor
awarding each party 50 percent of the marital
property, unless certain factors make a good case
for an unequal distribution.
Some of the factors
the court may consider in deciding whether there is
a good case for an unequal division of the marital
property are:
- An obligation
for support arising out of a prior marriage.
- A need for the
custodial parent to reside in the marital
residence.
- The duration of
marriage.
- The age and
physical and mental health of both parties.
- The
income-earning potential of both parties.
- The previous
direct or indirect contribution by one spouse
toward the education or career potential of the
other spouse.
Marital debt can
actually lead to each spouse receiving a negative
sum. For example, if the net value of the marital
property is $100,000, applying the 50/50 presumption
leads to each spouse's receiving property worth a
total of $50,000. If, on the other hand, the marital
property has a negative net value of, say, minus
$20,000 (due to large debts that outweigh the
spouses' positive assets), then applying the
presumption leads to each spouse's receiving
property worth a total of negative $10,000.
How you deal with
debt is important and could affect you for years to
come. There are several areas that need your
attention. The first has to do with debt that you
have acquired during the marriage. You will need to
obtain a copy of your credit history to determine
whether there is any derogatory information that has
been reported to the various agencies.
Not all of your
personal marital debts will appear on these reports,
only those for which the creditors consider you
responsible. For example, if you have a joint credit
card that you and your spouse have cosigned for, the
payment history related to that card will appear on
both your and your spouse’s credit histories.
However, if the credit card is in your spouse’s name
and you are just an authorized user, the payment
history may only appear in your spouse’s name. This
can be both good and bad. If the credit history is
good and in both names, you will benefit from it.
The opposite is true if the credit history is bad.
Credit card companies
should be notified immediately of your situation and
joint accounts closed, if possible, because
creditors will still consider you responsible for
any joint debts. Although no additional debts will
accumulate that are acquired by your spouse, you
will still be considered responsible for previously
existing debt. Because of this, it would also be in
your best interests to pay off any joint debts and
establish separate credit prior to the division of
assets.
Fault is not
considered relevant in equitable distribution cases,
unless marital misconduct has had an economic impact
on the value of the marital estate. If the division
of assets is contested, you should hire an attorney
to file a temporary injunction to protect your
rights, and the marital property.
If you would like
more information on debt responsibility, or would
like to schedule a consultation regarding your
property distribution issues, please
contact us.
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