Debt and how it is distributed is one of the most common issues that must be navigated during a divorce. Debt can take many forms, including everything from credit card debts to student loan debt to the mortgage on the marital home.
Under Colorado law, all marital property, including debts, must be divided in a way that is “equitable.” Many people assume that equitable means equally (50/50), but that is not always the case. Several factors go into how marital debts will be divided and a Court will often divide debt unequally, but in a way the Court considers equitable (or fair).
Before the Court can decide how to distribute the debts in a way that is equitable, it must first determine whether the debt is “marital” or “separate.” Generally, if the debt was created during the marriage it is “marital.” One common misconception is that debts that are in one person’s name are automatically separate, but that is not necessarily the case. For example, if a credit card is only in one person’s name, but the purchases were made during the marriage, it is likely that the credit card debt is “marital,” not “separate.”
It is common that people are surprised that they could be responsible for part of a debt that is only in their spouse’s name, but there are many reasons why the Court might decide that is fair. For example, in a situation where Husband has a credit card that is only in his name, but he made many purchases for the family’s benefit with that credit card such as paying for the children’s daycare, buying groceries, or paying for family vacations, the Court may require both spouses to have some responsibility for that debt.
As you can imagine, what Judges consider to be a fair distribution of debt can vary widely, so this can often become a complicated part of a divorce. This issue can become more difficult when there are debts such as student loan debt, loans from family members or friends, and debts for purchases that the other spouse was completely unaware of during the marriage.