Finances are often at the forefront when a couple has made the decision to divorce. Who will get what and how those decisions are made can create a lot of anxiety. Additionally, some couples are surprised to find out that debts are also divided in the divorce process.
Credit cards, home loans, auto financing and other debts will distributed between both parties. Because Oregon is an equitable distribution state there are some subtleties in how debts will be apportioned.
What is Equitable Distribution?
Equitable distribution is “a legal principle under which assets and earnings acquired during marriage are divided equitably (fairly) at divorce.”
Does “Equitable Distribution” mean we split debt equally?
No. It is important to note that equitable is not synonymous with equal. This means it is possible for assets and debts to be divided disproportionately. Depending on the unique facts of your case, it is possible that the court might divide marital debts and assets in a 40/60 split, but it’s also possible that the court will determine a 50/50 division to be fair.
Dividing debt in a divorce also comes with the additional hazard of enforcing the divorce decree. Unfortunately when your ex fails to pay off the debt that was awarded to them in the divorce, it is possible that the debtor can seek payment from you. In this situation, men often have to pay off the debt and then sue their ex for restitution. You are probably asking yourself, “how does this happen?”
Do creditors have to abide by my divorce decree?
Much to the chagrin of divorcing couples, credit card companies and mortgage holders are not bound by your divorce decree. If the debt was incurred during the marriage, creditors can seek repayment from either spouse. Opening a line of credit requires the debtor (you) and the creditor (the company to whom the money is owed) enter into a contract.
The family courts do not have the jurisdiction to alter the creditor’s rights and therefore can’t modify the terms of your debt. The court is restricted to assigning the responsibility of repayment, but that doesn’t guarantee you won’t still be liable for repaying the debt.
Dividing debt in a divorce can be a tricky subject. Making sure you understand all your rights and your options is important. If you have questions about how your debts will be divided in divorce, please give us a call. Our managing attorney, Colin Amos, is happy to answer your family law questions over the phone at no charge.