Divorce involves emotional and legal challenges, including how debt gets divided. As an equitable distribution state, Illinois divides debt and assets fairly, though not always equally. The court considers factors like each spouse’s financial situation, contributions to the marriage and the purpose of the debt. Marital debt, incurred during the marriage, is usually shared, while non-marital debt, such as pre-marriage obligations, typically remains with the individual who incurred it. A financial advisor can help you organize your finances and create a plan for managing assets and debts after divorce.
How Debt Is Divided During a Divorce in Illinois
In Illinois, debt is classified as either marital or non-marital, influencing how it is divided during a divorce.
Marital debt includes any debt acquired during the marriage, regardless of whose name is on the account. This debt is typically divided between both spouses in a fair manner, though not necessarily equally.
Non-marital debt, such as loans taken before marriage, usually remains with the spouse who incurred it. If non-marital debt was used to benefit the household, however, it may be considered in the division.
Here are four common forms of marital debt and how they are handled in Illinois:
- Mortgages taken out on a marital home are often a significant debt in divorce proceedings. Typically, if one spouse keeps the home, they assume the mortgage, possibly by refinancing. If neither spouse can afford the mortgage alone, the court may order the sale of the home, with proceeds used to pay off the mortgage and any remaining equity divided between spouses.
- Car loans are generally assigned to the spouse who retains the vehicle. In cases where both names are on the loan, refinancing may be necessary to remove one spouse’s name. If neither spouse keeps the car, it may be sold, with the proceeds used to settle the loan balance.
- Student loans taken before marriage are usually considered non-marital debt and remain the responsibility of the spouse who incurred them. However, student loans taken during the marriage may be divided if they were used to benefit the household, though the court often leans toward leaving education-related debt with the individual who benefited from it.
- Credit card debt is divided based on whether it was incurred for joint expenses or individual purchases. Joint credit card debt for household expenses is typically split, while individual debts may be assigned to the cardholder. The court examines spending habits and the purpose of the debt to determine fair division.
Court Considerations
When dividing debt during a divorce, Illinois courts consider several factors. This includes each spouse’s income, current assets and financial needs. The court also reviews the purpose of the debt, whether it benefited both parties and who is best positioned to handle the debt after the divorce.
Other factors, such as child custody arrangements and each spouse’s age and health, may also influence the decision, particularly in cases where debt repayment could impact a parent’s ability to support their children.
Complications Related to Dividing Marital Debt
Illinois divorce laws stipulate that debts can be divided in several ways, but it is important to remember that creditors are not bound by the divorce decree.
If a couple has joint debts and the court assigns responsibility to one spouse, creditors may still seek repayment from both parties if payments are not made. This means that even if the divorce agreement specifies that one spouse will handle certain debts, creditors can pursue repayment from both spouses if the responsible spouse defaults.
This issue is common with joint credit card accounts or other debts held in both names. If one spouse is allocated a particular joint debt and later fails to make payments, creditors may pursue the other spouse or even take legal action against both.
Such situations can impact the credit score of both parties, potentially limiting their ability to access loans or other financial benefits. To prevent these complications, it is typically advisable for both spouses to pay off joint debts before finalizing the divorce.
Although challenging amid the expenses of a separation, working together to resolve shared debts can help both parties move forward financially and protect their individual credit in the long run.
Frequently Asked Questions
Is Marital Debt Always Split 50/50 in Illinois?
No, Illinois is an equitable distribution state, meaning debt is divided fairly but not necessarily equally. The court considers various factors to determine an appropriate division.
Can I Remove My Name from a Joint Loan After Divorce?
You may be able to refinance the loan to remove your name. However, this depends on the lender’s policies and your ex-spouse’s ability to qualify individually.
Are Student Loans Considered Marital Debt in Illinois?
Student loans incurred before marriage are generally non-marital debt. However, loans taken during marriage may be divided if they benefited both spouses or the household.
What Happens to Credit Card Debt in Divorce?
Credit card debt is divided based on its purpose. Joint household expenses are typically split, while personal purchases may be assigned to the individual cardholder.
Bottom Line
In Illinois, dividing debt during a divorce involves classifying the types of debt and determining how they will be assigned. The court uses equitable distribution, considering factors such as each spouse’s financial standing, the purpose of the debt, and its effect on both parties. Knowing these factors can help you approach debt division more effectively during the divorce process.
Financial Planning for a Divorce
- A financial advisor can help rebalance your portfolio before, during and 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.
- Your finances may still be vulnerable after a divorce. To make sure you’re prepared, Here are five steps to help you repair your credit.
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