The American Psychological Association states that between 40-50% of marriages in the US end in divorce. This indicates that many couples have to figure out a way to handle debt that occurred during divorce proceedings. If you’re a Maryland resident, here are some important things to know about debt and divorce to protect your finances.
Legal responsibility for debt
Divorcing couples who live in community property states won’t necessarily pay marital debt according to which spouse created the debt. Both spouses could be equally liable even if one spouse was not aware of the debt.
Maryland is considered an equitable distribution state, which means the courts will assign the debt(s) to the spouse who created the debt. Usually, the debt belongs to the spouse whose name is on the bills for the debt. If both spouses are named on the debt, both are responsible for paying it, even after the divorce.
Figuring out debt arrangements before the divorce
It is best to try and make sure the debt is in the spouse of the spouse who is liable for it before the debt is finalized in divorce. This requires both parties to work together but this option is worthwhile for spouses who don’t want to pay for a debt that doesn’t belong to them. If you and your spouse have credit card balances, you may need to transfer the balance to other cards or consider debt consolidation.
Be sure to speak with your spouse about major debts such as car loans and mortgages to see if refinancing the debt in one party’s name is possible. These tips can make debt more manageable for both parties.