Divorce and Debt: How is Debt Split?

Not only is property divided during divorce, but debt is also typically split between the spouses when a marriage legally ends. Divorce and property division are frequently considered together, but often, couples do not consider what happens with divorce and debt. No matter which spouse’s name is on a credit card, a loan, or a mortgage, both share responsibility for the debt if it was acquired during the marriage. However, Oregon courts will first evaluate which debt is considered “marital debt” versus “separate debt” to determine whether it is subject to division.

Divorce and Debt: How Are Assets and Debt Divided?

There are two ways assets and debts can be divided in an Oregon divorce — either by an agreement made between the parties or by court order. While it’s generally best for spouses to reach an agreement outside of court, judicial intervention may be necessary if the parties cannot decide the matter on their own.

Importantly, Oregon courts follow the rule of equitable distribution when it comes to property and debt division. Unlike in a community property state where assets and debts are divided 50/50, “equitable” does not mean that property and debts are divided equally when it comes to divorce and debt. Although sometimes a judge may order spouses to share equal responsibility for marital debts, “equitable” effectively means that a court will divide assets and debt in a manner that is deemed fair.

What Factors Does a Court Consider When Deciding How Debt Should Be Divided?

Oregon courts aim to reach a decision regarding debt division that is fair for both parties. Sometimes this may mean that a court will make a higher-earning spouse take greater responsibility for debts acquired during the marriage. However, an Oregon judge will evaluate a number of factors to determine how debt should be divided, including:

• The amount of property
• Taxes
• The economic circumstances of each spouse
• The needs of the children
• Future income and anticipated costs
• The contributions of each spouse

Debts are treated the same as property when it comes to dividing them in divorce. If they were acquired during the course of the marriage, they are considered marital debts and subject to equitable distribution. But any debts acquired by either spouse prior to marriage will typically be classified as separate property. Spouses are each responsible for paying back their own debts that were incurred before the marriage was entered into.

How is Credit Card Debt Divided in Oregon?

When it comes to divorce and debt, credit cards are typically a big consideration. Credit cards can be a major source of debt during a marriage — and a significant source of contention once divorce proceedings are commenced. While both spouses are accountable for all credit card debt acquired during the marriage, Oregon courts will usually consider charges made after physical separation to be “separate debt.” In these cases, since the spouses are no longer paying household expenses together, a judge would typically deem it unfair for a separated spouse to be responsible for credit card debt incurred by the other. But both spouses may still be responsible for credit card debt after separation if it was acquired for the children’s health or education needs.

Critically, any credit card debt incurred while the marriage was intact — before physical separation — would qualify as marital debt. As with other types of debt, both spouses would be responsible for any charges made to the credit card while they were married, regardless of which spouse’s name is on the account. Spouses also share responsibility for credit card debt acquired during the marriage, even if they had no knowledge of their spouse’s purchases.

Who is Responsible for Student Loan Debt in an Oregon Divorce?

A spouse who accrued student loan debt before marriage will typically remain responsible for it after divorce. But matters can become more complicated if the student loans were taken out while the spouses were married. For instance, if the spouse co-signed the loan, they may be legally tied to the debt even after the marriage has ended. In addition, the court will not only evaluate the financial issue of who took out the loan — but it will also consider any sacrifices the supporting spouse made, including whether they put off their own education or contributed to more housework and chores.

Contact an Oregon Divorce Attorney

If you’re facing divorce and division of debt is an issue that must be considered, it’s important to have a knowledgeable divorce attorney on your side. A skilled attorney can help to ensure your legal and financial rights are protected as you go through the legal process of ending your marriage. Based in Salem, Litowich Law is dedicated to providing clients with compassionate counsel and reliable representation for divorce and family law matters in Oregon. We welcome you to contact us for a consultation.