Family Law, Divorce, Custody and Child Support Attorneys in Denver, Colorado

Division of Debt

During a marriage, sometimes couples acquire debt. Sometimes they acquire a lot of debt. Like assets, these debts have to be divided up at the end of the divorce process. How debts are divided shouldn’t be a mystery, but unfortunately it is.

Like so many other issues in a divorce, our legislature plays “hide-the-ball” when it come to dividing marital debt. We have no statute in Colorado that says marital debt is divided 50-50. Life would be simpler if we did. Instead, we’re left with the vague – yet very profitable-to-lawyers – phrase “an equitable division” of these debts.

In practice, and in general terms, courts and lawyers often (but not always) end up at a 50-50 division, regardless of the lack of specific direction from our legislature. We may give one spouse less debt, but also fewer assets, so as to make up the difference. But looking at the “global” division of debts and allocation of assets, we still think, generally, along the lines of a 50-50 split.

There are exceptions to the “in-practice” 50-50 split. But these exceptions are relatively few.

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So What’s the Rule?

In an action for Dissolution of Marriage, the law requires the court to divide marital property equitably between the parties. With a few exceptions, marital property includes both assets and debts of the marriage.

Debts acquired by either spouse after the parties were married and prior to a decree of legal separation will be presumed to be the responsibility of both spouses, while debt acquired by one spouse prior to the marriage will be presumed to be that spouse’s separate debt.

There are exceptions to these presumptions.  For example, debts like credit cards and lines of credit may go up and down and the underlying nature of the debt may be completely different than at the beginning of the marriage.  Often times lawyers manage these complicated issues by “tracing” the debt and it’s nature throughout the duration of the marriage.

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But That Card’s in Her Name!

Much like separate bank accounts during the marriage, maintaining separate credit cards may create the false impression that the other spouse isn’t responsible for cards held solely in one name.  Generally speaking, with few exceptions, all credit card debt incurred during the marriage is marital debt.

Simply because a credit card – or any other debt – is in one spouse’s name only does not make that debt the separate responsibility of that spouse. Not even close. That balance, no matter what – or who – it was spent on may be 100% marital debt.

So common is this assumption, we’ve grow used to the gasp as we tell our clients they’re on the hook for things like student loans, shopping sprees in New York, gambling losses, back taxes (even business related ones), and trips with paramours to Aruba. All marital debt. All to be divided. All to be paid.

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Nightmare Scenario – Or a Really Good Time in Monte Carlo

Since all debt incurred during the marriage is marital debt, regardless of who incurred it, debt incurred by one spouse, without the knowledge or consent of the other, has to be divided up in a divorce.

Prior to filing for a divorce, one spouse may run up debt by jetting off to an exotic location, wining and dinning at 5-star restaurants, best of the best … and the other one may very well get stuck, in one way or another, with half.

Oh, and remember, as a “No Fault” state, in Colorado, any marital misconduct of the parties during the marriage will not be considered by the court when determining property and debt disposition. Ain’t that a kick in the shorts.

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