If you are facing a divorce in Michigan, the thought of taking on your partner’s debt may be enough to give you cold sweats. Whether you will be responsible for it depends on a few factors, including when and how the debt accrued.
Understanding state law about the allocation of debt and property during a divorce can help you plan appropriately.
Marital versus separate debt
There are two types of legal property in a marriage: separate and marital. Separate property includes assets a partner owned before the marriage, individual gifts and inheritances that the couple keeps separate. Marital property includes all other property the couple acquired during the marriage, regardless of whose name is on the asset.
Likewise, all debts a couple acquires during marriage, regardless of the name on it, belongs to the couple as marital debt. For example, your spouse may take out a loan in his or her name, but a court will probably still assess that as marital debt. However, if your spouse brought prior debt into the marriage, a court is likely to consider it separate.
Debt and property division
During a divorce, debt division works much the same way as the division of property. The law requires courts to distribute both fairly and equitably based on the conduct of each partner during the marriage, the needs and earning potential of each partner and the source of the assets and debt.
A court will attempt to make as even a division as possible, but some factors can result in an uneven allocation. If one party is responsible for the marriage’s end, a court may assign a heavier debt burden to that person. A court may also consider the earning potential of each partner, allocating higher amounts of the debt on the person best equipped to manage it.
The assets a partner receives in divorce can also affect his or her debt burden. For example, if you receive the lion’s share of assets, a court may assign a greater share of the debt to go with it. Debt will typically remain with its attached assets — so the person who receives the house will also claim the mortgage.
In some cases, one partner acquires debt without the knowledge or consent of the other partner or obtains it through illegal activity. In these cases, you will probably have legal recourse to avoid responsibility.