In a divorce, two separating spouses must determine how to divide their assets between them, and this includes the debt that they owe. Of course, in a contentious situation like a divorce, this is easier said than done.
Just as community property is owned equally between spouses, so too is marital debt. Upon divorce, or dissolution of marriage, in Arizona, any marital debt that exists is divided equitably between the spouses.This means that each spouse takes a fair amount of the couple’s overall debt that was accumulated during the marriage.
Equitable division of the debt means that any assets and associated debt acquired during the marriage are divided as equally as possible, considering the impacts on both parties. However, separate assets and debts that belonged to either party outside of the marriage are not subject to this division.
Because Arizona is a community property state, the court will determine how to divide this debt as equally as possible. In the process, a court will identify all debts acquired during the marriage and develop a plan to have each spouse pay half of the debt back. Understanding the process will help you understand what to expect and how to navigate it.
Marital Debt Definitions
In Arizona, generally any type of debt that was acquired during a marriage is considered marital debt. In fact, it doesn’t matter which spouse incurred the debt, as long as the debt was acquired during the marriage, both parties are considered to be responsible for it.
Marital debt can include both types of debt – secured and unsecured debt – and it doesn’t matter if your name is specifically tied to the debt because Arizona is a community property state. For instance, if your credit card payment is in your spouse’s name, it can still be considered marital and shared debt, even if your name is not on the credit card account.
This is a contentious issue as creditors can sue both parties in a marriage, even if only one party is responsible for incurring the debt. If one spouse incurred significant credit card debt during the marriage, a creditor can hold the other spouse liable as well.
The circumstances would be different, however, if the credit card was taken out before the marriage, in which case, the debt would remain the responsibility of the sole debtor who took out the credit line. There are exceptions to these general debt guidelines, and your attorney can discuss them at length during the divorce proceedings.
Types of marital debt could include:
- Credit cards
- Mortgage loans
- Auto loans
- Tax debt
- Personal loans
- Miscellaneous personal debts
- Payday or installment loans
- Student loans
What Does It Mean To Be a Community Property State?
Under A.R.S. 25-211, Arizona is a community property state, which means that any property or debt acquired during a marriage belongs to both parties. During a divorce, the implication for community property is that both parties have a responsibility for managing any debt related to it, regardless of which party acquired the debt.
Therefore, any debt that either of the two parties incurred during marriage is considered to be community debt and divided evenly between them upon divorce. However, there are a few exceptions to this rule where the court may order one party to pay for all the debt.
Some of these exceptions include:
- Destruction of property
- Excessive or unusual spending that leads to debts
- A guarantee or indemnity transaction
- Theft or fraud in the management of communal property
- Damages from actions that lead to a criminal conviction of either spouse
Assets and debts acquired prior to marriage or after divorce proceedings begin are not considered community property. For example, if one spouse financed a car before the marriage and incurred this debt, they will still be responsible for the full amount of the debt after the divorce. Gifts also do not fall under community property.
Secured Debt vs. Unsecured Debt
Although all debt related to the two spouses during a marriage should be divided equitably, the type of debt has implications for how it is handled during a divorce. Secured debt and unsecured debt are the two most common types of debt to consider during a divorce.
It’s important to understand the differences between the two types of debt:
- Secured Debt – Secured debts are those that are tied to an asset of some kind, like a car payment or a mortgage, as the creditor has the option of taking possession of the asset.
- Unsecured Debt – Unsecured debts are those for which an asset is not attached, which can include credit card debts, medical bills, and smaller purchases.
In debt division during a divorce, disputes can arise surrounding how to divide these debts in relation to the assets associated with them. The court will determine how to distribute these debts in a fair and equitable manner. For example, if one spouse keeps possession of the car, then it should not be up to the other to pay the debts.
Disagreements on Marital Debt
During divorce proceedings, disagreements can arise over various types of the above debts. For example, if one spouse acquired student loans during the marriage, then the other spouse will be equally liable for this debt, and they may disagree with these terms.
These disagreements can lead to drawn-out litigation with the courts. However, it is possible for two spouses to agree on how to distribute marital debt through mediation methods without the need for court intervention.
Still, in cases where spouses cannot agree upon how to divide marital debt, the court will make the decision for them. In these cases, an experienced family law attorney can also assist in the division of marital debt upon divorce.
In either situation, when the spouses cannot agree to division on their own, the help of legal counsel may be required in order to protect the rights and responsibilities of each spouse. The complexities of marital debt may present legal challenges that the spouses can’t manage without a qualified attorney.
An attorney can be a valuable resource in navigating these complexities. For example, if a couple has multiple investment properties together, the debts can be extremely complex, including mortgages, property taxes, rental income, property appreciation, and more. An attorney can provide assistance in reviewing financial records, navigating disputes over the valuation of property, and ensuring a fair distribution of this debt during the divorce.
Get Experienced Legal Help with Marital Debt Division in Arizona
In Arizona, the division of marital debt is contingent upon the fact that it is a community property state, meaning that debt acquired during marriage is typically divided equitably by the courts. However, it’s possible for two parties to come to an agreement outside of the court. The help of an experienced family law attorney can help you understand your debt division options and provide additional support in navigating disputes between divorcing spouses.
At JacksonWhite Law, our family law team offers comprehensive divorce and mediation services. We offer a comfortable, positive atmosphere that can help you avoid the stress and frustration of divorce litigation.
To discuss your divorce or marital debt needs, contact our team. We offer consultations that can explain your rights and legal options when it comes to divorce and separation. We can even help you navigate negotiations and mediation to bring about a quicker resolution to your case.
Our team will help you understand your options as you navigate your divorce proceedings and provide valuable guidance in the process. Call the Family Law Team at (480) 467-4348 to discuss your case today.