How Debt Is Divided During Divorce in Michigan

How debt is divided in a divorce in Michigan follows the principle of “equitable distribution,” meaning debts are divided fairly but not necessarily equally. Courts consider several factors, such as the financial situation of each spouse, their roles in acquiring the debts and the overall contributions during the marriage. Marital debt, which is debt accumulated during the marriage, is generally split based on what the court deems fair, taking into account each spouse’s ability to pay. Debts incurred before the marriage usually remain with the spouse who originally took them on.

Consider working with an experienced financial advisor who can assist with the division of debt during a divorce in Michigan.

How Does Equitable Distribution Work in Michigan?

In Michigan, marital assets are divided during a divorce under the principle of equitable distribution. This method seeks to achieve a fair split of assets and debts between spouses, though it doesn’t always mean an equal split.

Unlike community property states, where assets are typically split 50/50, Michigan courts consider a variety of factors to determine what is fair for both parties involved. These factors include the duration of the marriage, the contributions of each spouse to the marital estate, overall financial needs and the earning potential of each individual.

Differentiating between marital and separate property plays a significant role in Michigan’s equitable distribution process. Marital property comprises assets and debts accumulated during the marriage, while separate property includes anything owned by either spouse before the marriage or acquired as a gift or inheritance.

However, separate property can become marital property if it is combined with marital assets. For instance, if one spouse inherits money from a parent and deposits it into an account they co-own with their spouse, it may be considered marital property subject to division. This means that debt is often divided equally among the two parties during a divorce.

Marital vs. Separate Debt

Two people sit across from each other with divorce paperwork and wedding rings between them.

When couples tie the knot, they often merge their lives in many ways, including their finances. However, understanding the difference between marital and separate debt is important in the context of divorce in Michigan.

Marital debt refers to any liabilities incurred during the marriage, regardless of whose name is on the account. This can include joint credit card balances, mortgages or car loans.
Separate debt is any financial obligation that one spouse brings into the marriage or incurs individually after separation.

Knowing which debts fall into each category can help couples manage their financial responsibilities more effectively.

While marital debt is a shared responsibility, separate debt remains the sole obligation of the individual who incurred it. To protect against the financial risks associated with separate debt, it is important for each spouse to maintain transparency about their individual liabilities. This can be achieved by keeping separate accounts for personal debts and ensuring that both parties are aware of each other’s financial commitments. In some cases, a prenuptial or postnuptial agreement can provide additional protection by clearly outlining the division of debts.

Factors That Determine the Division of Marital Debt in a Michigan Divorce

Understanding how debts are divided can help both parties prepare for the financial implications post-divorce. These are some of the key factors that influence how marital debt is divided in a Michigan divorce.

Equitable distribution principle: Michigan follows the principle of equitable distribution, meaning debts are divided fairly, though not necessarily equally. The court weighs a number of considerations to ensure a fair allocation, which may result in one party assuming more debt if it aligns with fairness.
Nature of the debt: The court distinguishes between marital and separate debts. Marital debts are those incurred during the marriage for joint benefit, while separate debts are those incurred by one spouse for personal reasons. Only marital debts are subject to division.
Financial contribution and earning potential: Each spouse’s financial contribution and earning potential are evaluated. A spouse with a higher income may be assigned a larger portion of the debt, reflecting their greater ability to pay.
Duration of the marriage: The length of the marriage can impact debt division. In longer marriages, debts are often more intertwined, leading to a more complex division process compared to shorter marriages.
Conduct of the parties: The court may consider the conduct of each spouse, particularly if one party’s actions led to an increase in debt. Reckless or irresponsible financial behavior by one spouse can influence the division of debt.
Custodial arrangements: If children are involved, custodial arrangements can affect debt division. The primary custodial parent may receive a more favorable debt division to ensure financial stability for the children.

Bottom Line

Two meet sit next to each on a sofa with their arms crossed.

Michigan follows the principle of equitable distribution, meaning that debt is divided fairly, though not necessarily equally, between spouses. This approach considers various factors, both monetary and non-monetary, such as the length of the marriage, each spouse’s financial situation and their contributions to the marriage. It’s important to note that any debt incurred before the marriage is typically considered separate and remains the responsibility of the individual who incurred it. However, debts accumulated during the marriage are usually classified as marital debt and subject to division.

Financial Tips for Navigating a Divorce

Ensure that any joint accounts are managed properly during and after the divorce. Close or freeze shared credit cards if necessary, and ensure both parties understand who will be responsible for outstanding debts. Establish individual credit in your name by opening a personal credit card or loan to help maintain a solid credit history going forward.
A financial advisor can help you plan for your life after a divorce. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.