Divorce is often a complex affair, even more so for high-asset couples with valuable property on the line. Wealthy couples also tend to have significant debts to consider as well, though, which raises the question of how to handle those debts in the face of an upcoming divorce.
It might not be immediately clear how a court will rule on the matter of dividing debts between divorcing individuals. By understanding more about the process, you can prepare for the future and even take steps to simplify your debt situation ahead of time.
What happens to debts in a divorce?
Like many other assets, debt accrued during the course of a marriage is marital property. This means that the court will equitably distribute debts between divorcing spouses. While you will ideally only receive half of the overall debt from your marriage, it is important to consider how this might affect you if you are transitioning to a single income from a two-income household.
How can you effectively manage debt during a divorce?
One prudent decision you and your spouse might come to is paying off debts ahead of time to remove those layers of complication from the divorce process. You might also consider using mediation as a way to take control of how you distribute debts and other assets. While the court will strive to make a fair and equitable decision on the matter, it is possible that one or both parties will be unhappy with a judge’s ruling regarding the division of debt.
Paying off certain debts before a split can simplify your life both during and after divorce. If you and your spouse wish to reach a compromise in which one individual takes on more debt in exchange for more assets, mediation is another viable solution.