What You Need To Know About Divorce And Allocation of Debts

For example, if there is an outstanding home equity loan of $10,000, but an available line of credit of $40,000, it probably is best to notify the creditor (orally and in writing) that the line of credit should not be extended beyond $10,000. Similarly, if one spouse co-signed on a business loan for the benefit of the other spouse’s business, it would be prudent for the spouse who does not own the business to notify the creditor that he or she will not be responsible for any business debts beyond those already incurred. 

One spouse normally will not be responsible for the debts of an-other spouse if debts were incurred only in the name of the spouse who made the purchase. In many states, however, an exception will be made for debts that are considered family expenses. Examples of family expenses include groceries for the family, the children’s necessary medical expenses, and children’s clothes. If a debt is considered to be a family expense, both spouses probably are liable for the debt, even if only one of them incurred the debt. Community property states also generally make spouses liable for each other’s debts incurred during the marriage. 

Educational loans are a common debt. Generally, a court will direct each party to repay his or her own loans for educational expenses. If, however, the debts were incurred during the marriage, it is possible for the court to direct one spouse to repay the other spouse’s educational debts. 

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