When it comes to divorce, dividing assets like the family home or retirement accounts often takes center stage. However, equally important yet frequently overlooked is the allocation of debts. The mortgage on your home, joint credit card bills or loans you took out together all shape your financial health post-divorce.
This rings especially true in Kentucky, an equitable distribution state, where both assets and debts are subject to fair, though not necessarily equal, division. But what does “fair” really mean when it comes to your financial obligations? Here are the five key elements that shape debt division in Kentucky.
Who incurred the debt
The first consideration in debt division is often who took on the debt. If you incurred a debt solely in your name before the marriage, it is typically a separate debt in the eyes of the law. However, debts taken during the marriage, even if only in one spouse’s name, usually fall in the marital debt category. This means both parties may be responsible for repayment, regardless of who made the purchases.
The purpose of the debt
If you took out a loan to renovate the family home or pay for your child’s education, it is likely a marital debt. On the other hand, if your spouse ran up credit card bills for personal luxuries or to support an affair, the court may assign that debt solely to them.
Income and earning capacity
If you earn significantly more than your spouse or have a higher earning potential, you might be assigned a larger portion of the marital debt. This approach aims to ensure a fair division that does not leave either party in financial distress.
Length of the marriage
Generally, the longer the marriage, the more likely the court is to divide debt equally between spouses. This is because the court views longer marriages as a joint partnership, where both spouses have contributed to the accumulation of debt.
Agreements or stipulations
If you and your spouse addressed debt division in a prenuptial or postnuptial agreement, the court will likely honor it. Similarly, if you and your spouse can come to a mutual agreement on debt division during divorce negotiations, the court will usually approve it, as long as the agreement is fair and reasonable for both parties.
Protecting your rights in debt division
As you face the complexities of your divorce, it is essential to consider how each of these factors might apply to your unique situation. Remember, how you handle debt division now will lay the groundwork for your financial future.
