Email FacebookTwitterMenu burgerClose thin

How Is Debt Divided During a Divorce?


During a divorce, debt is handled the same as assets. This means, primarily, that courts will try to follow two rules. First, courts will distribute debt based on its marital and pre-marital status. Debt that someone held before the marriage will, in general, remain entirely with that individual. Debt the couple accrued during the marriage will, usually, be distributed between the parties. Second, courts will attempt to distribute debt evenly. How that works is defined by state law, but most states attempt to reach an equitable distribution that takes into account income, lifestyle and other relevant factors. In all cases, an individual who makes more money or keeps more assets may also receive more of the household’s debt. Here’s what you need to know.

financial advisor can be a valuable resource to help you deal with the financial challenges of divorce.

During a Divorce, Courts Distribute Liabilities

When spouses divorce, they separate both assets and liabilities. If the two parties reach an agreement among themselves, few (if any) rules restrict their financial arrangements. They are largely free to distribute their property as they see fit. Once entered into, the divorce agreement is binding and cannot be unilaterally altered. 

If the couple does not reach an agreement, the divorce court will distribute the household’s finances. The court will divide up marital debt based on state law, following the same broad principals as with assets, typically distributing debt either equally (in half) or equitably (based on overall fairness).

Once the divorce is final, each party is only liable for the debt they were assigned. This means you will not owe payments on debts assigned to your former spouse.

This last is extremely important. It is not uncommon for debt collectors to try and convince people to pay their ex-spouse’s debts. While there can be some situations where ex-spouses share an asset or liability, typically either by agreement or because they assumed joint debt before the marriage, you do not owe debt that was entirely assigned to your former spouse. 

Like all matters of family and property law, divorce law is extremely state-specific. Each jurisdiction has its own rules for distributing debt, some of which may vary widely from standard practice.

Debt Is Divided First By Marital Status

As with assets, the first step in dividing up debt during a divorce is to determine the liability’s marital status. 

In general, a party is responsible for all finances that they bring to a marriage. With debt, that means each spouse will typically be assigned any debt they had before getting married. This is not divided up, but rather assigned to the original owner in full. Each party is also solely responsible for all debt taken on after a separation but before the formal divorce order. The concept of separation is defined on a state-by-state basis.

For many households, this is most important in the case of student loans. Today, it’s increasingly common for individuals to enter a marriage with debt burdens comparable to that of an unsecured mortgage. During a divorce, absent any unusual circumstances, each ex-spouse will remain responsible for student loans taken out before the marriage. 

Marital status does not affect debt that you took out jointly before the marriage. The structure of that debt will remain unchanged absent a specific order otherwise.

Debt Is Then Divided By Law and Equity

A woman researching how debt is divided by law and equity during a divorce in her state.

The second step in dividing up debt during a divorce is to distribute marital liabilities. These include all debt taken by either party during the marriage. 

Non-marital debt is distributed according to the law of each state. Broadly, there are two standards here: community property states and equitable distribution states

Under community property, the court will generally attempt to assign each party roughly half of the household’s debt (and half of its assets). This is because community property considers both spouses to have a 50/50 share in all marital debt and assets. A judge may then adjust this assignment based on specific circumstances, but cannot stray too far from an equal division.  

Relatively few states still use the community property standard. Equitable distribution, instead, has become the dominant model. 

Under equitable distribution, the court will generally attempt to assign debt fairly based on the overall circumstances of both spouses. For example, debt which both spouses knew about and agreed to, or debt that was spent for the benefit of the household, will typically by divided evenly. Debt taken out in secret or spent only for the good of one spouse will typically be assigned to that individual.

For example, say that you take out a credit card in your own name. If you spend the money on grocery and household goods, an equitable distribution court will likely split the debt between you and your spouse. If you spend the debt on mobile game microtransactions, that court will likely assign it to you. In both cases, a community property state would likely divide that credit card bill roughly evenly. 

From there, it is common for states to have laws addressing specific categories of debt. For example, many states will always assign gambling or student debt to the borrowing spouse. These laws are typically the biggest difference between how courts treat assets vs. debt in divorce.

What Happens to Mortgages and Auto Loans?

Secured debt will be distributed based on how the parties split up the underlying asset.

When you have a capital asset, like a house or a car, each party has a share of the asset’s equity and debt. This is typically resolved in one of two ways: First, the parties may sell the asset. In this case, they will split up any resulting proceeds or remaining debt. Second, one party may keep the asset. In this case, that divorce agreement will be adjusted based on the underlying equity or debt.

For example, say that you and your spouse own a home. It is worth $500,000, of which you still owe $300,000, giving you $200,000 in equity. In a divorce, you might sell the house and split the proceeds, possibly with each spouse taking $100,000 from the sale. Or you might want to remain in the house. In that case, you will owe your spouse their $100,000 share of the home’s equity. You might resolve that, say, by giving them $100,000 more of the 401(k) or taking out a loan to pay them the cash. 

Bottom Line

A woman looking up how secured debt gets distributed in her state during a divorce.

During a divorce, debt is generally split along the same lines as assets. Pre-marital debt remains with the individual who incurred it. Marital debt, meanwhile is divided according to the laws of the state. 

Debt Management Tips

  • Getting out of debt is an important financial goal to set for yourself. Here are six common steps you can take to become debt-free.
  • A financial advisor can help you build a comprehensive financial plan to manage debt and save for different goals. 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.

Photo credit: ©, ©, ©