An essential piece of every St. Louis County divorce is the division of debt, or more accurately, the allegation of responsibility for all debt incurred during the marriage. Technically, this means debt incurred from the date of the marriage to the date of divorce, but most often, the date of separation is used as the end date for debt division. However, if debt was incurred by one party to support themselves or the children of the marriage due to lack of financial support from the other party, there would most likely be a variation from this general rule.
One easy way to make this process easier is to stop using joint credit cards upon and after separation or reach an agreement about who will use which card.
This is an important (albeit unpleasant) piece of the divorce because technically the divorce is not final until all of the property is divided and responsibility for all of the debts incurred during the
Generally speaking, debt that is associated with a particular piece of property such as a house or other real estate, a car, a retirement account or a whole life insurance policy, goes with the property, meaning that the person who receives that property will also be responsible for the debt secured by that property. This is logical when you consider that in the division of the marital property, the court considers the net value of the property, value less debt secured by it.
Interestingly, I have never handled a case where one person was ordered to pay the student loans of the other.
The most perplexing and frustrating aspects of debt division in divorce is that the court can only divide the joint debts between the parties and cannot order a creditor who made a loan or extended credit to both people to seek collection of an unpaid debt only against the party who was assigned responsibility for that debt in the divorce.
We include in all of our agreements an obligation for each party to “indemnify and hold harmless” the other with respect to the debt assumed by that party, including the fees and costs incurred in enforcing this obligation to indemnify and hold harmless.
To “indemnify and hold harmless” means essentially to reimburse them if the creditor or holder of the debt successfully pursues payment of the debt from the person who was not responsible for the debt under the terms of the divorce. In my experience, this happens most often when the person who is responsible for the debt is self employed or who has hidden assets.
If the debt was in joint names and the creditor sues and collects from the non-responsible party, that party has the right to sue the responsible party for reimbursement of what was collected by the creditor. In reality, if a commercial creditor cannot collect, the chances are probably likely that the individual will not be able to collect.