Debt acquired during the divorce is a marital asset, so both parties are responsible for paying it. This is because Wisconsin is a marital property state where property gained during the marriage is owned by both parties. This includes student debt, credit card debt, and other common forms of debt.
Wisconsin is a community property state. This means that the court’s starting point is a 50/50 division of all marital property, this includes both debts and assets.
There may be opportunities to shift the 50/50 division of martial debts, based on the specific facts of a case. Factors the court will look at include:
Though divorces can be straightforward, most are complicated and depend on the specifics of each situation. To speak with an attorney about the specifics of your case, contact Divergent Family Law.
At base, all debt is split equally. However, the court will take a closer look to see the origin of the debts in a marriage. If you work with a family law attorney, your attorney may help you prepare a balance sheet of all assets and debts to outline the property division process more clearly and visually.
In a community property state, like Wisconsin, both parties are responsible for any credit card debt. However, this does not necessarily mean that you will have to physically pay half of each bill. For example, half of your spouse’s credit debt may be balanced by your spouse’s half of your credit debt, and then each of you can just pay your own debt.
Ultimately, it is about coming to an agreement with the other side. This means things don’t have to be split perfectly if both sides agree. For example, one side might have $5,000 in credit card debt and the other has $20,000 in student loan debt, but if each side says they are okay with keeping their own debt, the court will often accept that.
At base, student loan debt is a marital debt subject to the same 50/50 division as all other marital debts. However, when deciding how to allocate student loan debt in a final division of property, a given court official may choose to look at further details of this debt. They can look at when it was acquired, whether it was used solely for tuition, books, and other school-related expenses, or whether some portion of it was applied to marital expenses such as rent, mortgage payments, payments towards a vehicle, etc.
People hear strict rules about things in divorce like all student debt stays with the same person, but the reality is it is not that clean. The ultimate division of student loan debt in a divorce can vary among different courts and court officials, as well as different sets of facts and circumstance.
Even if a house is only in one person’s name, it is still usually considered marital property. This means both people are on the hook for the debt, but also that both people benefit from any equity.
How a mortgage on the marital home or other residence is handled in a divorce will depend on the what each party wants and what resources are available. For example, if neither party wants the house, it can be sold and the parties split any profits. If one side wants to keep it and can afford to, they can buy out the other person and take over the debt on their own.
In your final divorce order, the court will order which spouse is responsible for which specific debts or portions of debts. But we know life isn’t always as clean as a contract.
While you are not obligated by your divorce order to pay the debts assigned to your ex-spouse, creditors can often still come after you in the event your spouse does not pay his or her portion of an assigned debt. As such, it can be beneficial to use marital assets to pay off as much marital debt as possible prior to finalizing your divorce.
At base, all debts and assets of both parties to the marriage are considered marital. There are two exceptions to this baseline, where an asset may be considered individual property, and not marital property subject to the 50/50 division. Property that is gifted to an individual spouse and property that is inherited by an individual spouse are each initially excluded from property division.
However, in all the ways detailed above, separate property can become commingled. Ultimately, you can expect that most property will be considered marital.
To begin the property division process, each party is required by the court to complete and file a financial disclosure statement, or FDS. This is typically the longest financial form that you will fill out during the divorce process, as it provides a complete disclosure of all assets, debts, and liabilities to date.
Once each party has completed and exchanged financial disclosure statements, the parties and their respective attorneys can begin discussing how to divide the identified assets and debts. In the event that you and your spouse are able to negotiate this division yourselves, you may come to your own agreements on how to equitably divide the marital debts. These agreements are then outlined in your final divorce agreement, otherwise known as a marital settlement agreement. If the court approves of your marital settlement agreement, it can then be incorporated into your final divorce order.
In the event you and your spouse cannot reach an agreement, either on your own or with the assistance of a third-party mediator, the decision will be left to the court, where a judge or commissioner will make the final decision.
