A common question asked when we have the opportunity to do a consultation with a client who is going through a divorce or anticipates a divorce is whether they will have to pay or be responsible for debt that their spouse incurs. As with many things in the law, particularly in family law, the best answer is “it depends.” It is possible that you may end up being responsible for debts that your spouse has incurred, especially if you do not take preventive/protective action.
Both, Kansas and Missouri will divide assets and debts based on an understanding of whether the debt was incurred during the marriage (generally considered marital debt) or if it was incurred prior to the marriage (pre-marital debt) or if it was incurred “outside of the marriage” i.e. to pursue misconduct, which is generally considered dissipation. For example, if your spouse incurs debt to take a girlfriend or boyfriend on a trip to Europe, there is a strong position for the other spouse to say that he or she should not be held liable for that debt. However, this also requires action following learning about the debt. For example, if you learn that your spouse has taken such a trip and you fail to take action to divorce your spouse for a couple of years, the divorce judge may say that you accepted this debt as a marital responsibility based on you and your spouse continuing to stay together with one another.
How is debt generally divided in a divorce?
Judges in Kansas and Missouri dividing marital assets and debts, generally consider a variety of factors that may include the following:
- The income of each spouse
- The earning potential of each spouse
- The need of you or your spouse for additional training or education to reach earning potential
- The physical and mental health of each spouse
- The non-marital property of each spouse
- Tax consequences of assets awarded to each spouse.
- Marital misconduct or fault/dissipation of assets;
- The Length of the marriage
- Nonmarital property of each spouse
- Existence of a spousal support (maintenance) award
- Use of the marital home/the desirability of keeping the minor children in the family home;
- Retirement benefits
- Encumbrances on the property and other debts
- Child custody arrangements;
How Can You Protect Yourself?
One of the best ways to protect yourself from the risk of having to pay/be assigned debt, is to pay off as much debt are you are able to before you file for divorce. Another important consideration is to ensure/pursue full financial disclosure of financial information so that you are made aware of all debts that are in existence, particularly those you may not have been aware of.
After a divorce judgment/order is entered and final, it is important that you remove your name from any debt that is not yours/is not awarded to you. A judge has the ability to order your spouse to pay a debt you both share. Vehicles and real estate are two examples of this. You must remove your name from any debt that is no longer your responsibility. Creditors are not bound by divorce settlements or judgments. The creditors are only required to follow the agreement you/your spouse made with them at the time the debt was acquired. Generally, when property or assets remain under a finance agreement needs to refinanced in your spouse’s name alone if they are keeping that property.
If you are going through a divorce or other family law process where debt needs to be considered and divided and you should always work with a knowledgeable and experienced family law attorney. A divorce attorney can guide you to come up with a settlement agreement that includes important clauses that can protect your interests in a final agreement. One such crucial clause to negotiate for is an indemnity clause. If an agreement or judgment orders your spouse to pay certain debt and your spouse does not pay, even with a court order, an indemnity clause allows someone to take the other person back to court to address their non-compliance. A carefully worded court order can protect you from paying debt your former spouse was ordered to pay, at some point in the future.
Schedule Your Consultation Today
If you or your spouse have acquired significant debt during your marriage. It is crucial you work with a family law attorney who can help ensure that the needed protections are in place. You do not want to lose valuable assets or get stuck paying debts that your spouse was required to pay because your agreement was not well or properly written.
At Pingel Family Law, we can help you prepare a legally-compliant, protective agreement. Call ust (816) 208-8130 toay to schedule your consultation. Put our knowledge and experience to work for you!